Small businesses frequently run into problems when:
A)they offer equipment as collateral for a term loan.
B)they under-utilised the equipment purchased with the loan.
C)they overestimate the cash inflows from the equipment purchased with the loan.
D)they fail to match a term loan's payment terms with the expected cash inflows from the equipment purchased with the loan.

Question

Quizplus · Accepted Answer

Small businesses often take out term loans to purchase equipment, but they must ensure that the payment terms of the loan match the expected cash inflows from the equipment. If they fail to do so, they may find it difficult to make the loan payments, leading to financial difficulties. Overestimating cash inflows or under-utilizing the equipment could also be problematic, but matching payment terms with expected cash inflows is the most critical factor. Therefore, option D is the best choice.

Small Businesses Frequently Run into Problems When