Question

In guaranteed line of credit cases, the cash flow budgets prepared by an SEL or CLP lender must be based on three years of proven financial and production history.

a) True
b) False

Answer 1

In the guaranteed line of credit cases, the cash flow budgets prepared by an SEL or CLP lender must be based on three years of proven financial and production history.

Step-by-step explanation:

In the guaranteed line of credit cases, the cash flow budgets prepared by an SEL or CLP lender must be based on three years of proven financial and production history.

This statement is true.

When issuing a line of credit, lenders need to assess the borrower’s ability to repay the loan. By reviewing three years of financial and production history, the lender can gauge the borrower's cash flow and overall financial stability.

Answer 2

In guaranteed line of credit cases, the cash flow budgets must be based on three years of proven financial and production history.

Step-by-step explanation:

In guaranteed line of credit cases, the cash flow budgets prepared by an SEL or CLP lender must be based on three years of proven financial and production history. This means that the lender will analyze the borrower's financial statements and production records from the past three years to assess their ability to generate cash flow and repay the loan.

For example, if a company has consistently demonstrated positive cash flow and profitability over the past three years, it is more likely to be approved for a line of credit because it shows financial stability and the ability to repay the funds.

On the other hand, if a company has a history of negative cash flow or financial instability, the lender may be more hesitant to extend a line of credit as the risk of non-repayment is higher. Therefore, the cash flow budgets for guaranteed line of credit cases consider a borrower's proven financial and production history to assess their creditworthiness.