Multiple choice

Which of the following is the most appropriate difference between a deferred payment guarantee and a term loan?

  1. Term loan is sanctioned for purchase of fixed assets and DPG for purchase of current assets.

  2. TL is a fund based loan and DPG is a semi-fund based loan.

  3. In TL, funds outlay is immediate but in DPG, it is contingent.

  4. In TL, appraisal is more detailed than the appraisal of DPG proposal.
Reveal answer Fill a bubble to check yourself
C Correct answer
Explanation

A term loan is a loan from a bank for a specific amount that has a specified repayment schedule and a fixed or floating interest rate. Thus, it is fund based. However, DPG is a payment guarantee issued to your exporter for deferred or timely payment of the goods, and corresponding interest. ICBC undertakes to pay your exporter in the event you are unable to pay the principal and interest as scheduled in the contract. Thus, that depends on situation, i.e. contingent.

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