What is credit?
True or false? Credit is an agreement between two parties in which one party lends money or provides goods or services to another party with the understanding that payment will be made at a later date.
true
True or false? The most common types of credit are closed-end credit and secured credit.
false
What is the annual percentage rate(APR)?
The annual cost of credit charged by a lender.
What is a proprietary credit card?
One that can only be used in the stores of the company that issued it.
True or false? For long term credit, many small business use bank-issued credit cards, such as Visa and MasterCard.
False
what is the difference between a creditor and a debtor?
Creditor is the party to whom money is owed while, the debtor is the party who owes money to a creditor.
What is closed-end credit?
A loan for a specific amount that must be repaid with interest by a specified date or according to a specified schedule.
True or false? The APR revels the true cost of credit and helps to compare different loans and other sources of credit.
True
True or false? Before making the decision to extend credit to customer, a business should establish a credit policy.
True
What are the 5 Cs of banking?
*Cash flow
*Capacity
*Capital
*Collateral
*Conditions
what is the main purpose of credit?
to serve as a medium of exchange that allows individuals business, and governmental agencies to buy goods or services now and pay for them later.
What forms are loans granted by?
Commercial banks, credit unions, finance card agencies and individuals.
What is the simple interest formula that is used to calculate the cost of a loan?
Principal(P)xRate(R)xTime(T)- Interest.
What are the 3 Cs of credit?
Character, Capacity, and Capital.
What are the 2 Types of business credit?
Supplier Financing and Bank Financing.
what are the benefits that credit provides?
* ability to use goods and services
* opportunity to buy costly items
* source of funding
* convenience
If the finance charge is the total amount of money paid to a lender for the use of credit. How does that benefit interest rates?
interest rates will vary among different lenders and with the collateral pledged.
What 3 factors are used for the total amount paid for the use of credit?
*Interest rate charged
*Amount of credit used
*Length of the repayment period.
What is an example of the cost associated with extending credit to customers?
Customers who do not pay their credit balance create bad debts, which decrease the net income of a business.
What is the difference between a business loan and a business line?
A business loan is money borrowed from a bank for a purpose while, a business line is an established amount of money a bank makes available for use.
How is credit important to the economy?
It provides consumers, businesses, and government additional using power needed to support production and distribution of products.
What is the purpose of the amortization table? What does it show?
The amortization table is used as a schedule that shows the amount of interest and principal applied with each payment.
what are 4 risks of consumers who overuse credit...
Not making payments on time, lower credit score, higher interest rates, and personal bankruptcy.
What does The Truth in Lending Act require?
It requires a business that provides information to customers before the first transaction.
The SBA is an agency of the federal government that assists small business with financing. However, The SBA doesn't make loans. So what does it do?
The SBA guarantees loans up to 80 percent make by private lendors.