A fronting loan disguises the identity of a parent multinational corporation that infuses money into a foreign subsidiary. This technique is intended to reduce the political risk of operating a subsidiary in a foreign country.

Question

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A fronting loan is a type of loan where a parent multinational corporation provides funding to a foreign subsidiary, but the identity of the parent company is disguised to minimize political risk. By using a fronting loan, the subsidiary may be able to avoid negative consequences of being associated with a foreign parent company during times of political turmoil or instability in the host country.

A Fronting Loan Disguises the Identity of a Parent Multinational