C.W. Beauregard is an Atlantic salmon farmer. He produces and sells salmon to satisfy the growing demand for fish. He has arranged a business loan with terms that guarantee that he can borrow up to $12,000 whenever he needs it within the next year. He must pay interest only on the unpaid loan balance. Beauregard has arranged which type of credit?

Question

Quizplus · Accepted Answer

C.W. Beauregard has arranged a line of credit, as the loan terms allow him to borrow up to a certain amount whenever he needs it within the next year, and pay interest only on the outstanding balance. This is a flexible form of credit that is commonly used by businesses to manage their cash flow and meet short-term financing needs. The other options are not appropriate, as a single-payment note requires the borrower to repay the full amount borrowed at a specified date, a collateralized loan requires the borrower to pledge assets as security for the loan, and a credit-line loan is not a commonly used term in finance.

CW Beauregard Is an Atlantic Salmon Farmer