LIBF CertBB Practice Questions - LIBF Level 3 Certificate In Business Banking (CertBB) Exam

Why do banks often treat limited companies differently from sole traders when assessing credit risk?

Limited companies never borrow Sole traders always pay corporation tax instead of income tax Companies cannot grant security The company is a separate legal person, so lenders assess company cash flow, balance sheet strength and often seek personal guarantees from directors

Correct Answer:

The company is a separate legal person, so lenders assess company cash flow, balance sheet strength and often seek personal guarantees from directors

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