Banks will not usually lend the full value of the assets that are used as security. The safety margin is likely to be even larger in the case of loans that are secured by inventory.

Question

Quizplus · Accepted Answer

This statement is true as banks typically only lend a certain percentage of the value of the assets that are used as security in order to ensure they have a buffer in case the assets decrease in value. In the case of inventory, there may be additional concerns about obsolescence or damage, which could require an even larger safety margin.

Banks Will Not Usually Lend the Full Value of the Assets