Which term describes a loan facility that lets a business borrow as needed up to a limit?

• A. Barter
• B. Line of Credit
• C. Business Incubators
• D. Primary Data

Answer: (B)

The concept being tested is a flexible borrowing arrangement that lets a business draw funds as needed up to a predetermined limit. A line of credit works like an ongoing credit account with a lender: you can borrow up to the approved credit limit, repay any amount, and then borrow again as needed. Interest is charged only on the portion you actually use, and the available credit is replenished as you repay, making it a revolving source of working capital. This setup is especially useful for managing day-to-day cash flow, covering gaps between payables and receivables, and smoothing seasonal or irregular expenses.

Barter involves exchanging goods or services without money. Business incubators are programs that provide resources and support to help startups grow. Primary data refers to information collected directly through experiments, surveys, or observations for a specific project. These options describe different concepts, not a financing mechanism like a line of credit.