CFI CBCA LOAN SECURITY QUESTIONS WITH DETAILED
VERIFIED AND 100% ACCURATE ANSWERS
Loan Security Learning Objectives Correct Answers 01. Compare
different types of security and assets used as security
02. Determine the security value of different assets based on MAST
principles
03. Discuss the role of legal counsel and the importance of legal
representation
Security is a form of Correct Answers insurance that is provided by the
borrower.
• No loan should be granted if the lender expects security will have to be
enforced or realized.
• Security is taken as a final safeguard in case of default.
Manage the risk of a borrower defaulting on the loan: Correct Answers -
Assess sources of loan repayment
-Assess security
Types of security Correct Answers Direct
• Real estate
• Machinery and equipment
• Inventory
Indirect
, • Personal guarantees
• Corporate guarantees
• Letters of comfort
Direct security relates to Correct Answers collateral that can be used to
secure a loan.
Two ways for a financial institution to secure its financing position
using assets: Correct Answers Fixed Charge: (Land, Buildings,
Machinery)
• Attaches to a specific item of the company's property.
• The lender has legal right to the asset.
• The charge fixes to the asset.
Floating Charge: (Inventory, A/R, Marketable securities)
• Attaches to a general class of assets.
• Borrower can trade its assets during the ordinary course of business.
• The charge would fix if there's an insolvency or a loan default.
Two common ways to protect the lender with direct security: Correct
Answers Specific Collateral
• Specific asset(s)
• In the case of default, the lender takes ownership of the asset(s)
VERIFIED AND 100% ACCURATE ANSWERS
Loan Security Learning Objectives Correct Answers 01. Compare
different types of security and assets used as security
02. Determine the security value of different assets based on MAST
principles
03. Discuss the role of legal counsel and the importance of legal
representation
Security is a form of Correct Answers insurance that is provided by the
borrower.
• No loan should be granted if the lender expects security will have to be
enforced or realized.
• Security is taken as a final safeguard in case of default.
Manage the risk of a borrower defaulting on the loan: Correct Answers -
Assess sources of loan repayment
-Assess security
Types of security Correct Answers Direct
• Real estate
• Machinery and equipment
• Inventory
Indirect
, • Personal guarantees
• Corporate guarantees
• Letters of comfort
Direct security relates to Correct Answers collateral that can be used to
secure a loan.
Two ways for a financial institution to secure its financing position
using assets: Correct Answers Fixed Charge: (Land, Buildings,
Machinery)
• Attaches to a specific item of the company's property.
• The lender has legal right to the asset.
• The charge fixes to the asset.
Floating Charge: (Inventory, A/R, Marketable securities)
• Attaches to a general class of assets.
• Borrower can trade its assets during the ordinary course of business.
• The charge would fix if there's an insolvency or a loan default.
Two common ways to protect the lender with direct security: Correct
Answers Specific Collateral
• Specific asset(s)
• In the case of default, the lender takes ownership of the asset(s)
