60 Questions
What is the least desirable approach for handling a problem loan according to the text?
Staying with the account 'no matter what'
Which aspect should be reviewed to gain insight into the ability of the account manager to handle a workout?
Relationship between account manager and borrower
What is important when using legal counsel for dealing with problem loans?
Selecting counsel for providing legal advice only
What does a senior level task force provide in handling problem loans?
A decision-making body for quick handling
In gathering information about problem loans, what can correspondence reveal?
Communication problems
What is the most important tool in detecting a problem loan?
Monitoring the borrower's account for frequent overdrafts
What may late statements from a company indicate?
Delayed production because of bad news to report
What should you do if a company provides late statements or information?
Extend the time for compliance or suggest changes in reporting requirements
Why are frequent overdrafts considered a warning sign of company problems?
They signal deterioration in the company’s cash position
How should an analyst respond when faced with late statements from a borrower?
Extend the time for compliance or suggest changes in reporting requirements
Which of the following is NOT a potential warning sign that a loan may become problematic?
The company has been consistently meeting all loan covenants
If a borrower hands over the keys to the plant and says they are unable to continue operations, what does this suggest?
The borrower is facing severe financial distress
Which of the following is NOT a recommended step when identifying and developing strategies for problem loans?
Initiate legal proceedings against the borrower immediately
When dealing with a problem loan, what should the lender do first?
Gather additional information to understand the root causes
What is the primary reason for identifying potential problem loans early?
To increase the chances of successfully resolving the problem
Which of the following is NOT a nonfinancial cause of company problems mentioned in the text?
Cash flow problems
Which of the following actions could be taken when a warning sign appears regarding a borrower's ability to pay taxes?
Require the borrower to make tax payments directly to the lender and supply a receipt
Which of the following is NOT mentioned in the text as a potential warning sign of deteriorating relationships between a company and its suppliers?
The company has a history of switching suppliers frequently
Which of the following questions should be considered when developing strategies for a problem loan?
All of the above
Based on the information in the text, which of the following actions could a lender take to gather more information about a problem loan?
Require a copy of the general ledger each month and have statements and canceled checks routed through the lender's office
Which of the following is a key question to consider when developing strategies for a problem loan?
Will the company lose more money by continuing to operate or by shutting down?
Which of the following actions could a lender take to gather more information about a problem loan?
All of the above
What is the most important tool in detecting a problem loan, according to the text?
The text does not mention the most important tool in detecting a problem loan.
If a borrower hands over the keys to the plant and says they are unable to continue operations, what does this suggest according to the text?
The text does not provide any information about what this situation suggests
Which of the following is a key question to consider when developing strategies for a problem loan?
All of the above
What is the primary purpose of reviewing the authority documents when dealing with a problem loan?
To determine who has the legal authority to borrow on behalf of the company
Which of the following is the MOST important step a lender should take when faced with a potential problem loan?
Perform a comprehensive documentation review
When developing strategies for a problem loan, which of the following should be a key consideration?
The ability of the account manager to effectively handle the workout
Which of the following is the MOST important analytical aid for a lender when evaluating a problem loan?
Comprehensive cash flow analysis and liquidity assessment
When faced with a borrower who hands over the keys to the plant and states they are unable to continue operations, what should the lender's primary concern be?
The potential for the borrower to file for bankruptcy protection
What is one of the highest potential costs associated with problem loans?
All of the above
Which of the following is NOT mentioned as a potential cost or consideration when developing strategies for problem loans?
Opportunity cost of lost investments
When dealing with a problem loan, what is the recommended approach regarding legal counsel?
Request an initial fee estimate and updated estimates
Based on the information provided, which of the following is a potential warning sign that a loan may become problematic?
Frequent overdrafts on the borrower's accounts
When developing strategies for a problem loan, the text suggests that you have two main choices. Which of the following is NOT one of those choices?
Restructure the loan terms with the borrower
In determining lien priorities for a problem loan, what is a crucial step to take?
Order lien searches and obtain copies of all filings from relevant locations
If a borrower has delinquent tax obligations, what potential risk should be considered in developing a workout plan?
The tax liens may have priority over the lender's perfected liens
If pending lawsuits or judgments against the borrower exist, what should the lender do?
Factor the risks into the workout plan based on legal counsel's assessment
Which of the following actions is NOT recommended when gathering information about a problem loan?
Relying solely on the borrower's financial statements and disclosures
If a borrower hands over the keys to the plant and claims inability to continue operations, what should the lender's immediate response be?
Consult legal counsel to assess the risks and potential next steps
What potential liability may a financial institution face related to the exchange of credit information?
Being held liable for false representations or omissions in credit information
When responding to a credit information request, what must an individual ensure to avoid liability for the financial institution?
Exercising reasonable care and diligence in providing accurate information
What is a key requirement for a plaintiff to prove in order to establish liability in the exchange of credit information?
Misrepresentation or omission of significant facts
What should financial institutions do before demanding payment on a loan without notice, according to the text?
Consult with legal counsel
In what scenario can a financial institution take possession of collateral without prior notice, as mentioned in the text?
If the borrower is unable to continue operations and hands over the keys to the plant
What are lender liability claims that financial institutions may face when suing to collect a debt?
Failure to negotiate in good faith
Which of the following is NOT among the theories put forth in lender liability claims?
Improper loan processing
What is one of the factors that lenders might require before issuing a commitment letter to a customer?
Proof of corporate existence
When a borrower hands over the keys to the plant and says they are unable to continue operations, what does this action suggest according to the text?
A potential warning sign for lender liability claims
What type of claim does the automatic stay NOT stop against a guarantor for a debt that arose before filing?
Legal action to enforce a collateral agreement
What is the LEAST desirable approach for handling a problem loan according to the text?
Filing for bankruptcy and litigation
Which of the following is a key consideration when developing strategies for a problem loan, according to the text?
All of the above
What is the MOST important analytical aid for a lender when evaluating a problem loan, according to the text?
The text does not mention a specific analytical aid
What is the primary reason for identifying potential problem loans early?
The text does not mention a primary reason for identifying potential problem loans early
Which of the following is a potential warning sign of a deteriorating relationship between a lender and a borrower, according to the text?
All of the above
What could happen if a lender serves on the borrower's board, based on the text?
Lead to interference/control risk and possible liability
What is a possible consequence of a lender suggesting which of the firm's checks should be honored or returned?
Causing interference/control risk and potential damages
Why is it important for a lender to avoid exerting pressure on the borrower's board according to the text?
To minimize interference/control risk and potential liability
How can a lender reduce the likelihood of being held liable for damages to the borrower or third parties according to the text?
By avoiding interference/control risk
What impact can disputes over conversations between parties have on a lender according to the text?
Result in lender liability suits
Learn about the common steps in identifying problem loans and warning signs. Discover how to document early signs of a problem loan through risk-rating systems or watch lists.
Make Your Own Quizzes and Flashcards
Convert your notes into interactive study material.
Get started for free
