ECON QUIZ: Obtaining Credit

Why is it important to have an honest relationship with your banker about your business activities?

• bankers will lower their interest rate

• bankers may share contacts with you that could help your business to grow

• bankers help the business to lower its tax liability

• bankers can help you to increase your credit score

What is one of the most requested documents in a loan application package?

• operations history

• employee listing

• blueprint of the business location

• advertising brochure

Olivia owns a small business and has taken credit from the bank for the first time. How can she maintain a healthy and long-term relationship with her bank?

• using the entire loan amount that has been disbursed

• maintaining a healthy balance in the bank account

• making regular credit card payment

• paying back the interest and the principal on time

Company X is a manufacturing plant and has been in operation for more than twenty years. It now needs to invest in a warehouse to store its finished products. What are the costs that Company X can foresee as part of the cost?

• natural disaster

• labor strike

• insurance of the premises

• machine repair due to breakage

What are the three C’s that a lending institution looks for?

• cash flow, commitment, and condition

• condition, credit, and cash flow

• commitment, condition, and credit

• cash flow, credit, and commitment

angel investors

• They lend only when they are assured of collateral.

• They invest in a company in lieu of convertible debts and shares of the company.

• They readily give business loans to smaller business with competitive interest rates.

• They mostly give interest free credit to startups.

asset back lending

• They readily give business loans to smaller business with competitive interest rates.

• They lend only when they are assured of collateral.

• They invest in a company in lieu of convertible debts and shares of the company.

• They mostly give interest free credit to startups.

Carlos is the owner of a small business unit. He has set aside funds to finance the day-to-day activities of the business. He tries to use these funds judiciously and any surplus from these funds is used to take care of unexpected opportunities. Having a substantial fund of this nature also helps his business to get higher credit. What is this fund called? The fund that is set aside by Alistair is called ______________

• capital

• asset backed lending

• working capital

venture capital

• Pedro approaches the US

  Small Business Administration

  for funding.

• Maya is willing to pledge

  collateral for taking a loan.

• Grace tries to raise credit

  through the Internet.

• Neveah approaches individual

  speculators and institutions

  for competitive loan terms.

government loans

• Pedro approaches individual

  speculators and institutions

  for competitive loan terms.

• Maya approaches the US

  Small Business Administration

  for funding.

• Grace is willing to pledge

  collateral for taking a loan.

• Neveah tries to raise credit

  through the Internet.