Podcast
Questions and Answers
What risk arises when a lender refuses to make advances under a discretionary line of credit without providing a reason?
What risk arises when a lender refuses to make advances under a discretionary line of credit without providing a reason?
- The borrower may decide to end the credit facility immediately.
- The borrower may claim that the lender did not act in good faith. (correct)
- The lender may face criminal charges for not explaining the refusal.
- The lender loses all rights to the outstanding balance.
Why do lenders get into trouble with discretionary line of credit agreements?
Why do lenders get into trouble with discretionary line of credit agreements?
- Setting unreasonable repayment terms.
- Making statements that contradict the written documents. (correct)
- Having too many borrowers under similar agreements.
- Not disclosing the terms clearly to borrowers.
How can financial institutions protect themselves from failing-or-refusing-to-lend risk?
How can financial institutions protect themselves from failing-or-refusing-to-lend risk?
- Keeping records of only successful lendings.
- Having all agreements and amendments in writing and signed by all parties. (correct)
- Limiting credit file comments to only positive feedback.
- Avoiding written agreements with borrowers.
In litigation, what is subject to discovery?
In litigation, what is subject to discovery?
What action can expose a lender to possible future litigation regarding discretionary lines of credit?
What action can expose a lender to possible future litigation regarding discretionary lines of credit?
What should lenders provide borrowers with in case of an event of default?
What should lenders provide borrowers with in case of an event of default?
Why should lenders limit credit file comments to factual matters?
Why should lenders limit credit file comments to factual matters?
What happens when everyone understands discretionary line of credit agreements?
What happens when everyone understands discretionary line of credit agreements?
Why are lenders advised to have all agreements and amendments in writing and signed?
Why are lenders advised to have all agreements and amendments in writing and signed?
What is a major risk for lenders who go beyond written documents in discretionary line of credit agreements?
What is a major risk for lenders who go beyond written documents in discretionary line of credit agreements?
What should lenders do to protect themselves from failing-or-refusing-to-lend risk?
What should lenders do to protect themselves from failing-or-refusing-to-lend risk?
In discretionary line of credit agreements, what does the lender reserve the right to do?
In discretionary line of credit agreements, what does the lender reserve the right to do?
What action exposes a lender to possible future litigation concerning discretionary lines of credit?
What action exposes a lender to possible future litigation concerning discretionary lines of credit?
Why should lenders avoid making promises beyond what is written in discretionary line of credit agreements?
Why should lenders avoid making promises beyond what is written in discretionary line of credit agreements?
What can lenders do to avoid failing-or-refusing-to-lend risk when dealing with borrowers?
What can lenders do to avoid failing-or-refusing-to-lend risk when dealing with borrowers?
Why do lenders get into trouble with discretionary line of credit agreements?
Why do lenders get into trouble with discretionary line of credit agreements?
What is the consequence of a lender refusing to make advances under discretionary lines of credit without providing a reason?
What is the consequence of a lender refusing to make advances under discretionary lines of credit without providing a reason?
What should lenders provide borrowers with regarding an event of default?
What should lenders provide borrowers with regarding an event of default?
Why is it important for lenders to have all agreements and amendments in writing and signed by all parties?
Why is it important for lenders to have all agreements and amendments in writing and signed by all parties?
What is recommended regarding credit file comments for financial institutions?
What is recommended regarding credit file comments for financial institutions?
What is the purpose of early identification of a problem loan?
What is the purpose of early identification of a problem loan?
What could trigger a company being watch-listed as a potential problem loan?
What could trigger a company being watch-listed as a potential problem loan?
When should warning signs of a potential loan problem be addressed?
When should warning signs of a potential loan problem be addressed?
What does the appearance of a warning sign regarding a loan indicate?
What does the appearance of a warning sign regarding a loan indicate?
What is one possible cause of a potential loan problem mentioned in the text?
What is one possible cause of a potential loan problem mentioned in the text?
What is the main focus when a borrower hands over the keys to their plant and indicates an inability to continue operations?
What is the main focus when a borrower hands over the keys to their plant and indicates an inability to continue operations?
What could indicate that an owner or manager has changed their personal investing style?
What could indicate that an owner or manager has changed their personal investing style?
What is a potential issue if a company has family members on the payroll?
What is a potential issue if a company has family members on the payroll?
What is a risk when a company ventures into new business areas outside of its proven expertise?
What is a risk when a company ventures into new business areas outside of its proven expertise?
What could indicate that an owner or manager is diverting business funds for personal use?
What could indicate that an owner or manager is diverting business funds for personal use?
How can a company's diversification into new business areas affect a lender?
How can a company's diversification into new business areas affect a lender?
What is a potential issue if an owner or manager becomes less willing to share information about the company?
What is a potential issue if an owner or manager becomes less willing to share information about the company?
What formula is used to calculate the break-even level in units?
What formula is used to calculate the break-even level in units?
What is the Break-Even Sales level when considering fixed costs and profit?
What is the Break-Even Sales level when considering fixed costs and profit?
What aspect of historical relationships is a special concern in the analytical process?
What aspect of historical relationships is a special concern in the analytical process?
How can documentation flaws impact the analytical process?
How can documentation flaws impact the analytical process?
What should lenders consider about other creditors in credit analysis?
What should lenders consider about other creditors in credit analysis?
What should the lender do with the signed copy of the letter provided to the borrower and guarantors?
What should the lender do with the signed copy of the letter provided to the borrower and guarantors?
What does the Ability to Improve Your Collateral Position refer to?
What does the Ability to Improve Your Collateral Position refer to?
What strategy could be best for a customer with rapid growth but limited capital, causing over-advances on its line of credit?
What strategy could be best for a customer with rapid growth but limited capital, causing over-advances on its line of credit?
What is the main reason why the text suggests lenders should fully disclose all known information to the buyer when selling a problem loan?
What is the main reason why the text suggests lenders should fully disclose all known information to the buyer when selling a problem loan?
What is the main reason why the text suggests that liquidation should only be considered as an option when there is a high probability that it is the lender's only source of repayment?
What is the main reason why the text suggests that liquidation should only be considered as an option when there is a high probability that it is the lender's only source of repayment?
What is the main reason why the text suggests that lenders should obtain and keep evidence that the guarantor understood the terms of the guaranteed loan?
What is the main reason why the text suggests that lenders should obtain and keep evidence that the guarantor understood the terms of the guaranteed loan?
What is the main reason why the text suggests that many guarantors look for ways to avoid having to pay on the guarantee?
What is the main reason why the text suggests that many guarantors look for ways to avoid having to pay on the guarantee?
What are the key elements that must be proven for a successful negligent misrepresentation claim against a financial institution?
What are the key elements that must be proven for a successful negligent misrepresentation claim against a financial institution?
What is a recommended practice for financial institutions to limit the possibility of litigation related to credit information exchange?
What is a recommended practice for financial institutions to limit the possibility of litigation related to credit information exchange?
What is a recommended practice for financial institutions regarding confidentiality agreements with borrowers?
What is a recommended practice for financial institutions regarding confidentiality agreements with borrowers?
In the context of breach of fiduciary duty claims, what must borrowers typically prove regarding the financial institution representative?
In the context of breach of fiduciary duty claims, what must borrowers typically prove regarding the financial institution representative?
What should financial institutions do to maintain a record of credit inquiries and responses?
What should financial institutions do to maintain a record of credit inquiries and responses?
