Final answer:
To secure a line of credit from a bank, a borrower can use a cosigner or provide collateral as security. Collateral can be property or equipment, which the bank can sell if the borrower defaults.
Step-by-step explanation:
The means of assembling and pledging loans to serve as security for a line of credit from a commercial bank involves several steps.
First, a prospective borrower must provide proof of income sources to the bank.
Next, the bank conducts a credit check on the borrower's past borrowing history.
One common method to secure a loan is by having a cosigner agree to repay the loan if the original borrower defaults.
Another method is by providing collateral, such as property or equipment, which the bank has the right to seize and sell if the loan is not repaid.
Collateral acts as a form of security for the bank, ensuring it can recover the loan amount if the borrower fails to make payments.
In the case of a firm, the borrowing process is similar to that of an individual.
The firm borrows money and agrees to repay it with interest over time.
Failure to repay may lead to legal action, with the bank requiring the sale of the firm's assets to fulfill its debt obligations.