how do I describe the purpose of the loan to the bank

The purpose of the loan must be concrete and business-related

The bank does not ask for a label such as "growth" or "working capital" without specification, but for a concrete purpose: which investment, which purchase or which business process the loan finances. Think of "purchase of production machine", "bridging inventory under construction" or "acquisition of business premises". The more specific, the fewer follow-up questions. A vague description such as "general business operations" often leads to a supplementary question from the bank, because that does not provide sufficient basis for the customer due diligence that the bank is required to carry out.

That customer due diligence is the background to this question: the bank must, according to the Law on the prevention of money laundering and financing of terrorism, know where the money is going and whether that logically aligns with the nature of the business. Therefore, the purpose of the loan is often combined in the same questionnaire with questions about the origin of assets and business activities. Have you already documented something for this previously — for example with the source of the company's assets — then the answer to this question is usually a logical consequence of that: the same investment, the same justification. A supporting document does not always need to be separate: a quotation, purchase agreement or investment budget is usually sufficient as justification, should the bank later request it.

Why the bank wants to know this so precisely

This question follows from the mandatory customer due diligence of the Law on the prevention of money laundering and financing of terrorism: the bank must be able to assess the business relationship and the transactions for logic and risk, and the purpose of a loan is a key question in this regard. This is separate from the question about the ultimate beneficial owners of the company, but is often asked in the same round of questions: both questions are part of the same investigation into who the customer is and why he is requesting financing.