Brian is an experienced contractor who has been in the construction business for $18$ years. He has independently managed several commercial building projects in the past.

Brian now wants to take on a large residential development $-$ building $35$ luxury townhomes in an upscale neighborhood. The total project cost is estimated at $$22$ million.

Brian has approached First National Bank for a construction loan. However, his current financial situation presents some challenges:

$1.$ Collateral: Brian's personal assets total only $$4$ million in value, insufficient for the desired $$22$ million loan.

$2.$ Legal Issue: Brian is involved in an ongoing lawsuit related to a prior construction defect, with potential damages of $$150,000.$

$3.$ Real Estate Risk: The bank is wary of the significant exposure to residential real estate market conditions that this large townhome project would entail.

Which option best handles Brian's limited collateral situation?

Question $7$Answer

a$.$

Require Brian to partner with another firm that can provide additional collateral

b$.$

Approve the full unsecured $$22$ million based on his $18$ years of experience

c$.$

Approve a $$4$ million loan fully collateralized by Brian's current assets

d$.$

Deny the loan as Brian lacks sufficient collateral