Are bank lines of credit to small firms collateralized?
A) All of them are.
B) Some of them are, especially if the firm is risky.
C) Some of them are, especially if the firm is safe.
D) None of them are.

Question

Quizplus · Accepted Answer

Bank lines of credit to small firms are often collateralized, especially if the firm is considered risky. This provides the bank with some security in case the firm defaults on the loan. However, not all lines of credit are collateralized, and this depends on various factors such as the firm's creditworthiness and the type of industry they operate in. Therefore, option B is the best choice, as it acknowledges that only some lines of credit are collateralized, based on the level of risk associated with the firm.

Are Bank Lines of Credit to Small Firms Collateralized