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Credit Analysis and Lending Flashcards

7 cards from real CBP practice questions. Tap to flip, then mark Knew It or Still Learning — missed cards come back until you master them.

Read the first 7 Credit Analysis and Lending flashcards as text

  1. What is the primary purpose of a Uniform Commercial Code (UCC) filing in commercial lending?

    Answer: To publicly perfect the lender's security interest in personal property collateral

    A UCC filing (financing statement) perfects the lender's security interest in personal property, establishing priority over other creditors.

  2. When analyzing accounts receivable as collateral, a lender would typically apply an advance rate to the:

    Answer: Eligible receivables after excluding aged, disputed, and related-party items

    Lenders apply advance rates only to eligible receivables, excluding aged (typically 90+ days), disputed, or concentrated receivables that pose higher collection risk.

  3. A 'bullet' loan structure requires the borrower to:

    Answer: Pay only interest during the term with full principal due at maturity

    A bullet loan (interest-only loan) requires periodic interest payments with the entire principal balance due in one lump sum at maturity.

  4. Which financial statement provides the most direct evidence of a borrower's ability to repay from operations?

    Answer: Cash flow statement

    The cash flow statement, particularly operating cash flows, directly shows the actual cash generated from business operations available for debt service.

  5. In commercial real estate lending, the loan-to-value (LTV) ratio is calculated as:

    Answer: Loan amount divided by the appraised value of the property

    LTV equals the loan amount divided by the property's appraised value, measuring collateral coverage and equity cushion for the lender.

  6. A 'criticized' loan in bank regulatory terminology refers to a loan that:

    Answer: Has been identified as having well-defined weaknesses warranting special attention

    Criticized loans are classified by regulators (Special Mention, Substandard, Doubtful, or Loss) based on identified weaknesses that could jeopardize repayment.

  7. When a borrower 'pledges' inventory as collateral, the lender's primary concern is:

    Answer: The liquidity and marketability of the inventory if the borrower defaults

    Lenders must assess how quickly and at what value inventory can be liquidated, since specialized or perishable goods may be difficult to sell.