Final answer:
A borrower who is unable to meet the cleanup period on a line of credit indicates a higher credit risk, and in such a case, a lender might require collateral to secure a loan. This is in contrast to borrowers with a proven repayment record, low leverage, or strong cash flows, who are generally considered lower risk.
Step-by-step explanation:
The situation that describes a credit risk that is less than excellent, where a loan might be granted only with acceptable collateral, is when the borrower is not able to meet the cleanup period on a line of credit. This indicates there may be liquidity issues or poor financial management, which heightens the risk for the lender. When a borrower does not meet the terms of the credit line, it suggests they may struggle to repay, hence the consideration of collateral to secure the loan.
On the contrary, a borrower with a long-standing relationship with an institution and a solid repayment history (proven record of repayment), lower leverage than industry peers, or extremely strong cash flow from operations would typically be considered lower risk. These borrowers would be less likely to require collateral to secure a loan due to their more reliable financial indicators.