When creditworthiness is a criterion for government loans, the applicant must demonstrate asatisfactory history of repaying debt, as this reflects their ability to fulfill repayment obligations in the future.
Why a Satisfactory History Is Required:
Past repayment behavior is considered the best indicator of future performance. Government agencies prioritize reducing the risk of defaults by ensuring applicants have a proven history of managing debt responsibly.
Why Other Options Are Incorrect:
A. A credit rating from a major bank:While a credit rating is helpful, it is not typically required for government loans. Instead, creditworthiness is evaluated based on repayment history and other financial factors.
C. Sufficient capitalization:This is important for business loans, but it does not address creditworthiness.
D. A promise to pay interest at the government borrowing rate:A promise is not sufficient to establish creditworthiness.
References and Documents:
OMB Circular A-129:Requires agencies to assess creditworthiness before granting loans.
GAO Loan Management Guide:Highlights repayment history as a key criterion for loan approval.
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