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Business Studies

Loans from Commercial Banks

A loan from a...

Question

A loan from a bank is a ____________ source of finance as the loan amount can be increased according to business needs.

A

Permanent

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B

Temporary

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C

Flexible

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D

Rigid

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Solution

The correct option is C
Flexible

A loan from a bank is a flexible source of finance as the loan amount can be increased according to business needs and can be repaid in advance when funds are not there.

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Loans from commercial banks is a flexible source of finance.

Q. Manav needs a loan to set up a small business. On what basis will he decide whether to borrow from a bank or a local moneylender?

Manav needs a loan to set up a small business. On what basis will Manav decide whether to borrow from the bank or the moneylender? Discuss.

Q. Abdul is a single owner of a shoe manufacturing business. His business was suffering from continuous losses. To revive his business and to expand, he took a loan of 20 lakhs from 'Progressive Finance Co.' In spite of starting new range of products and great effort by Abdul, business continued to suffer losses. This resulted in the declining assets and mounting debts. Abdul started defaulting on his repayment schedule. Finance company served him final notice to repay the loan and settle the account. He proposed the finance company to take over the business assets and clear their dues. Finance company took over the assets of the business in part settlement of their dues as the assets were not sufficient to settle the debts and they claimed the remaining amount from Abdul from his personal assets. Abdul refused to do so on the ground that loan was taken for the business and not by him for personal use.
1. Name the form of business organization followed by Abdul.
2. Is the finance company justified in asking for remaining amount from Abdul's personal assets? justify your answer by giving suitable feature of the business organization.

Akash needs a loan of amount ₹40,000. He pays ₹4,000 extra to the bank. Find the monthly amount that he needs to pay for 11 months?

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