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Which borrowers typically turn to a finance company?
ALarge firms with the strongest credit ratings available
BGovernments raising money for long-term public works
CPeople and firms that cannot get credit anywhere else
DBanks that need to top up their reserves overnight
Answer & Solution
Correct answer: C. People and firms that cannot get credit anywhere else
1. Finance companies often lend to individuals or businesses that cannot get credit elsewhere.
2. Promising new businesses with no track record fall into that group, as do firms a bank will not extend further credit to.
3. The security pledged is what makes such lending possible despite the weak credit standing.
4. The strongest rated borrowers can raise money more cheaply from banks, so they have no reason to come here.
_Source: OpenStax Introduction to Business (CC BY 4.0), Ch 15 "Understanding Money and Financial Institutions", section 15.3 U.S. Financial Institutions_
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