Business Credit Facilities

KNOWLEDGE EXPECTED OF: CFP® Professionals

Highest Knowledge Level: Evaluation

Knowledge Levels and Associated Verbs


Awareness
The state of being aware that something exists / to have familiarity with a particular activity or subject
Understanding
To comprehend the general relationship of particulars / to have an expertise with how something works
Application
Ability to put information to use / to use knowledge for relevant, practical purposes
Evaluation
To judge or conclude by utilizing data / a systematic determination of something’s worth or significance
Define
To state exactly the meaning of
Identify
To be aware of / to recognize and correctly name / to locate an appropriate resource
Explain
To make clear the meaning of / to describe something in more detail or reveal relevant facts or ideas related to it
Determine
To ascertain / to come to a decision, such as by investigation or reasoning
Compare
To note the similarities and differences between two or more things
Estimate
To determine an approximate value for
Calculate
To find the value using mathematics
Convert
To change from one form or purpose to another
Evaluate
To reach a conclusion or make a through careful study
Interpret
To give the meaning of / to construe or understand / to translate orally

Hold cursor over or click on each term to read its definition.


Additional Knowledge Expected of CFP Professionals
  • Define types of business credit facilities, such as:
    • Operating line of credit
    • Commercial mortgage
    • Business loan
    • Letter of credit
  • Identify the purposes for which each type of business credit facility may be used.
  • Explain for whom each type of business credit facility may be suitable. 
  • Estimate the terms of a business credit solution. 
  • Determine how each of these factors may impact the suitability of a business credit facility:
    • Purpose of credit or borrowed funds
    • Amount of credit requested / required
    • Ongoing need for borrowing capacity
    • Fiscal responsibility
    • Expected variability of interest rates
    • Cost, including interest and fees
    • Impact on cash flow
    • Payment options (schedule, amounts, options)
    • Expected prepayments
    • Collateral requirements
    • Expected lifetime of collateral (if applicable)
    • Closure requirements / costs
    • Tax impact
  • Evaluate how each of the factors may impact the suitability of a business credit facility.