Creditors are interested in assessing a borrower's capacity and character, as well as overall economic conditions when reviewing a loan application.Which of the following would make a bank more willing to lend funds?
A)A small business faces deteriorating business conditions because of a recession in the overall economy.
B)The owner of a small business has been personally bankrupt twice.
C)A retail store has been diligent in making all of its payments on time and in full over the past five years.
D)A large corporation missed an interest payment on one of its bond issues last month.

Question

Quizplus · Accepted Answer

Creditors are interested in a borrower's history of making timely payments and being responsible with credit, so a retail store that has been diligent in making payments on time would be more attractive to lenders. Option A is not desirable because the business is experiencing a downturn, and option B is a red flag because the owner has a history of bankruptcy. Option D suggests that the corporation is not able to make payments on their debt, which makes it less likely for a lender to want to give them more credit.

Creditors Are Interested in Assessing a Borrower's Capacity and Character