Question

Srishti wants to start a restaurant of her own. As she does not have any savings, she approaches her bank for money and enters an agreement with the bank. According to the agreement, the bank agrees to lend her $5,000 upon request, provided it has sufficient funds to loan the amount. In this scenario, the type of funding obtained by Srishti can be regarded as a _________.

Answer 1

Line if credit

Step-by-step explanation:

Line of credit (LOC) refers to the total amount of money in which a bank has agreed to lend you at a specific interest rate to be paid at a particular period of time. It is agreement between a bank or credit union that state the maximum amount of loan a customer is eligible to.

The borrower can take loan from the financial institution as many times as possible as long as it is still within the maximum limit reached in the agreement coupled with prompt payment of loan. Line of credit is an open-end credit account, which allows borrowers to spend the money, repay it, and spend it again in a continuous cycle.

The lender(financial institution) is responsible for setting the maximum amount of loan, interest rate, payment rate, duration of loan and other things.

The type of funding obtained by Srishti from the bank is called line of credit.

Answer 2

Line of credit.

Step-by-step explanation:

A line of credit is a loan that is issued by the bank to the customer. This type of loan can be withdrawn at any period of time by the customer.

A line of credit is a type of loan that can be used as a credit card. It is possible for a customer to withdraw money up to a maximum amount when needed, pay back and then withdraw the money again.

A line of credit enables the customer to borrow money without paying a high amount of interest. This type of loan can be used at any time without any form of restriction.