Explain the difference between term loans, revolvers, and lines of credit and when each is used.

• A. Revolvers allow ongoing borrowing up to a limit with renewal.
• B. Term loans have fixed principal repayment; revolvers allow ongoing borrowing up to a limit with renewal; lines of credit are available for ongoing access; selection depends on cash flow predictability and working capital needs
• C. Lines of credit are available only for short-term needs.
• D. Term loans are revolving with variable principal payments.

Answer: (B)