I. Match the following descriptions with each of the components in the loan review process.

1. Involves re-assessing any changes that have occurred within management that may impact the business ability to tackle potential issues. (A, B, C, or D?)

2. Involves re-assessing the direction of the business, potential opportunities, and other issues the company is facing. (A, B, C, or D?)

3. Involves re-assessing any assets that are being used as protection in the case of default. (A, B, C, or D?)

4. Involves re-assessing the cash flow and financial position of the borrower. (A, B, C, or D?)

A. Financial statement review

B. Security review

C. Management review

D. Business review

II. Which of the following is NOT a reason to perform an annual review on a borrower?

A. An annual review gives a borrower a sense of general loan parameters such as the interest rate, time to maturity, and security.

B. An annual review allows a lender to re-assess and meet a borrowers changing needs.

C. An annual review provides an opportunity to do a comprehensive re-assessment.

D. An annual review helps a lender identify a borrowers business trends, early warning signs and mitigate credit risk.

III. Which of the following activities will be performed during a security review?

A. A re-assessment of personal and corporate guarantors.

B. A re-assessment of the corporate structure of the borrower.

C. A re-assessment of the strategy and decision-making process of the borrower.

D. A re-assessment of borrower cash flows.

IV. What are covenants?

A. Clauses in a loan agreement outlining what a borrower must maintain or what they are restricted from doing.

B. Assets or property pledged to a lender as protection in the case of default.

C. The amount of the loan approved for a borrower as stated in a loan agreement.

D. The credit risk rating assigned to a borrower based on quantitative and qualitative measures.