Business Credit Essentials Quiz

What are the key lending principles in credit risk assessment?

• Principle of Control

• Principle of Prioritizing the Quality of Credit

• Principle of Protection

• Principle of Risk Taking

What is the purpose of the 5Cs model in credit risk assessment?

• To assess the borrower's compliance to rules and regulations

• To assess the borrower's industry, economic, and SME credit application

• To assess the borrower's credit history, income, and repayment capacity

• To assess the borrower's character, capacity, capital, collateral, and conditions

What is the purpose of the CAMPARI model in credit risk assessment?

• To assess the borrower's credit history, income, and repayment capacity

• To assess the borrower's character, capacity, capital, collateral, and conditions

• To assess the borrower's industry, economic, and SME credit application

• To assess the borrower's compliance to rules and regulations

What are the categories of collateral based on the behavior of collateral value over time?

• Depreciating, Fluctuating, Stable, Appreciating

• Appreciating, Depreciating, Stable, Fluctuating

• Fluctuating, Appreciating, Depreciating, Stable

• Stable, Depreciating, Appreciating, Fluctuating

What is the purpose of the loan agreement in business lending?

• To assess the borrower's compliance to rules and regulations

• To set out the contractual and legal relationship between the lending bank and the borrower

• To assess the borrower's credit history, income, and repayment capacity

• To assess the borrower's industry, economic, and SME credit application

What are the major sections included in the loan agreement?

• Structure and terms of the loan facilities, Conditions precedent, Conditions for drawdowns, Continuing conditions

• Character, Capacity, Capital, Collateral, Conditions

• Margin of finance, Purpose, Repayment terms, Amount

• Compliance and monitoring of covenants, Credit facilities, Credit information, Verification

What is the purpose of the conditions precedent in a loan agreement?

• To provide the lending bank some control over the use of funds from the loan

• To be fulfilled prior to making the loan facilities available

• To set out the contractual and legal relationship between the lending bank and the borrower

• To ensure the borrower maintains discipline and proper conduct over the use of the loan facilities

What are the warning signals relevant to risk assessment in business lending?

• Margin of finance, Purpose, Repayment terms, Amount

• Character, Capacity, Capital, Collateral, Conditions

• Minimum equity covenant, Working capital maintenance, Collateral value that are potentially appreciating, Collateral value that are stable

• Qualified audit reports, Recent change of the company’s auditors, Frequent change of offices and warehousing arrangements, Court notice of litigation against the loan applicant or borrowers

What is the purpose of covenants in a loan agreement?

• To be fulfilled prior to making the loan facilities available

• To provide the lending bank some control over the use of funds from the loan

• To set out the contractual and legal relationship between the lending bank and the borrower

• To ensure the borrower maintains discipline and proper conduct over the use of the loan facilities

What is the purpose of compliance and monitoring of covenants in business lending?

• To provide the lending bank some control over the use of funds from the loan

• To set out the contractual and legal relationship between the lending bank and the borrower

• To ensure the borrower maintains discipline and proper conduct over the use of the loan facilities

• To be fulfilled prior to making the loan facilities available