Fundamentally, a financially strong borrower has more "skin in the game," so to speak, and consequently has greater incentives to make well-informed investment choices and to take the actions needed to ensure good financial outcomes.
Because of the good incentives that flow from the borrower's having a significant stake in the enterprise and the associated reduction in the need for intensive evaluation and  2  BIS Review 68/2007  monitoring by the lender, borrowers in good financial condition generally pay a lower premium for external finance.