Completing a Credit Application

1-Which of the following is NOT a component of a credit application?

Security

Comparable Company Analysis

Environmental Comments

Management Analysis

2-Which of the following is NOT a reason why the ownership structure of a company is important for the credit application?

Review Later

The tangible net worth of the company owners can be evaluated when considering the collateral of the company.

Depending on the ultimate beneficial owners, regulations may prevent us from lending to the company.

Ownership determines who is liable for the loans taken by the company.

It gives an idea of who the primary decision-makers are and the effectiveness of the decision-making process.

3-What does a proper loan structure accomplish for the borrower and the lender?

Maximizes available funds; charges the highest interest rate

Satisfies financial needs; optimizes profitability

Minimizes interest fees; speeds up the approval process

Solves working capital shortfalls; increases account monitoring efficiency

4-Which of the following statements is TRUE about reviewing a borrowers history and background?

A borrowers history with the financial institution should not be used for annual reviews as it may skew the credit evaluation with non-current information.

For existing borrowers, the most important part of the annual review process is to review changes that have occurred since the last review.

Extending a loan to a newer company is safer than an older company because the lender can place stricter covenants.

You should review what an existing borrowers company offers every year to ensure they have not changed their primary market or value proposition.