Cumulative level test: Product distinctions and household-risk boundaries

Check understanding, separately from reading

10 questions · 80% to pass · no timer. This longer test revisits both units in the level. These authored questions assess recognition and application of the taught distinctions, not professional qualification. You may review the lessons and retry. Repeat attempts reuse the question bank; a remembered answer is not proof of transfer to a new situation.

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Question 1

Fictional Harbor is offered a receivables purchase with estimated debits. Ask what happens when sales fall, whether reconciliation is meaningful, and what recourse applies. Do not say “not a loan, so no rules apply.”

Owner: “So an MCA can never be treated as a loan?”The name alone does not decide that; the actual terms, conduct and jurisdiction need legal review.Correct. Calling it a purchase automatically exempts it from all lending laws.

Question 2

A wholesaler repeatedly buys inventory before customer collections. A monitored line may match the cycle, but a borrowing base or covenant can limit draws even when the headline limit looks large.

Owner: “The limit means all that cash is always available?”Yes. The limit is guaranteed spendable cash forever.Not necessarily; let us verify available credit, borrowing-base conditions and draw restrictions.

Question 3

For an oven expected to serve for years, Harbor compares a conventional equipment term loan with a short remittance product. The longer term may reduce immediate strain but can increase total cost; it is not automatically preferable.

Owner: “A small monthly payment proves this loan is cheaper?”We also need total payments, fees, maturity and any balloon to compare cost.Yes. The smallest payment always gives the lowest cost.

Question 4

Fictional Ridge Manufacturing can prepare records and discuss a 7(a) option with a participating lender. A broker may assist truthfully within its role but must not call an ordinary MCA “SBA approved.”

Owner: “Does the government guarantee mean I cannot lose?”Yes. SBA approval makes the transaction risk-free for you.No. The guarantee supports the lender; you still need to understand your repayment and guarantee obligations.

Question 5

Harbor’s oven offer includes a buyout; another requires return or renegotiation. The word “lease” alone does not reveal the final cost. Ask for the option price and whether it is mandatory or elective.

Owner: “After the last lease payment, the oven is mine?”Only if the written ownership and end-of-term terms say so; let us verify them.Every equipment lease automatically transfers ownership.

Question 6

Tide has an acknowledged invoice from an established customer. A factor may advance a portion, hold a reserve and collect from the customer. A disputed or unearned invoice cannot be treated as equivalent to an accepted receivable.

Owner: “Factoring means I never worry about customer nonpayment?”Correct. Selling any invoice removes every possible liability.We must review exactly which credit risks, disputes and recourse obligations the agreement covers.

Question 7

Harbor’s owner asks about using a HELOC to rescue payroll. The business might receive cash, but the owner introduces household housing risk. Do not conceal that transfer of risk behind “lower rate.”

Owner: “It is just another business line, right?”No. A HELOC puts your home at risk and has its own draw, repayment and rate terms.Yes. Using the cash for business removes personal home risk.

Question 8

A fictional owner identifies a payment reported late despite a dated receipt. They can document and dispute the error. A different owner has an accurate recent delinquency; calling it identity theft would be false.

Owner: “Can you erase accurate negatives and guarantee my score?”Yes. Use a new credit identity and dispute everything.No. We can discuss checking reports for genuine errors, but cannot promise deletion, a score or approval.

Question 9

Harbor compares keeping its existing schedule against a longer replacement loan. The replacement reduces weekly strain but extends obligations. Both total outlay and the lowest cash balance matter.

Owner: “Lower payments mean we save money?”Not necessarily; compare remaining old payments with all new payments, fees and the payoff process.Yes. Lower periodic payments prove lower overall cost.

Question 10

An owner hears “one smaller payment,” but old providers still debit the bank account and the new funder sends conditional weekly deposits. This can be layered funding rather than a payoff. Ask what happens if a deposit is delayed or terminated.

Owner: “Reverse consolidation erases my old advances on day one?”Yes. The name guarantees that old contracts disappear.Do not assume that. We need proof of payoff or a schedule showing every surviving obligation and new disbursement.

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