Which arrangement allows a bank to lend up to a specified amount on request?

• A. Venture Capital
• B. Equity Capital
• C. Bootstrapping
• D. Line of Credit

Answer: (D)

A line of credit provides a ready-cash safety net by giving a lender a pre-approved borrowing limit that you can draw from as needed. You only pay interest on the funds you actually borrow, and you can repay and re-borrow up to the maximum whenever your business needs liquidity. This flexible, on-demand access to funds is exactly what the arrangement is designed for.

Venture capital and equity capital involve giving up ownership in the company in exchange for investment, not a revolving loan facility you can draw on at will. Bootstrapping relies on internal funds and cost-cutting rather than a lender guaranteeing a credit limit, so it doesn’t offer the same on-demand borrowing ability.