why does the bank want to know exactly what the loan is for

Loan purpose is part of customer due diligence

The bank asks for the exact purpose of the loan because it is a mandatory part of customer due diligence under the Anti-Money Laundering and Countering the Financing of Terrorism Act. The bank must not only know who its customer is, but also whether a transaction fits the company and its activities. A loan for working capital, for a business acquisition or for the purchase of machinery each require different substantiation, and the bank documents why the requested amount is logical given the stated purpose.

This is separate from the credit assessment itself — the bank looks separately at repayment capacity — but the answer to this question does affect which supporting documents are requested. In an acquisition, the bank often also wants to have insight into who are the ultimate beneficial owners of the company, particularly if the acquired party has a different governance structure. In a loan for international expansion, the question about the source of the company's assets may follow, even if that capacity has nothing to do with the loan — the bank examines the customer profile as a whole, not just the transaction.

Substantiation follows from customer due diligence, not from the Trade Register

The obligation to know the purpose of a transaction follows from the Anti-Money Laundering and Countering the Financing of Terrorism Act, which requires banks as institutions to conduct customer due diligence before and during a business relationship. This is a different legal basis than the Trade Register Act 2007, which only establishes which basic data of an enterprise are publicly registered — legal form, directors, place of establishment. The loan purpose is not recorded anywhere in the Trade Register and is therefore not data the bank can look up; the bank must ask for it and document it as part of its own filing obligation.