What characteristic makes bank loans less favorable for certain entities?

The characteristic that makes bank loans less favorable for certain entities is the lack of transparency compared to the bond market.

In the context of finance, transparency refers to the clarity and openness regarding the terms, conditions, and overall health of various financial products. When entities consider financing options, they often weigh the advantages of clarity in costs and risks associated with different types of loans or funding. The bond market typically enables a wider dissemination of information about the credit quality and performance of issuers, as bonds are often subject to more stringent public disclosure requirements. This can make it easier for investors to evaluate the associated risks confidently.

In contrast, bank loans may involve less publicly available information, making it difficult for potential borrowers and investors to fully understand the terms and associated risks. This lack of transparency can deter entities looking for financing, as they may prefer to engage in funding mechanisms where they can access more detailed information readily. Therefore, the comparative transparency of the bond market makes it a more appealing option for those seeking clarity in their financing decisions.