Marcus is an experienced builder with over $12$ years in the construction industry. He has worked on several residential and commercial projects for various firms. However, Marcus has not independently completed a major project from start to finish as the lead builder.

Marcus now wants to start his own home building company. He has identified an opportunity to construct a new subdivision of $20$ single$-$family homes in an upcoming housing development. The total project cost is estimated at $$8$ million.

Marcus has approached Zeta Bank to seek financing for the subdivision project. He has provided the standard documentation $-$ business plan, project details, cost analysis, and projected returns.

While Marcus has solid construction experience, the bank needs to evaluate a few potential risk factors:

$1.$ Collateral: Marcus does not have enough personal assets or property to fully collateralize the requested $$8$ million loan. His current collateral is valued at only $$2\mathrm{.}5$ million.

$2.$ Legal Risk: Marcus is currently involved in a pending court case related to a previous construction project. Depending on the outcome, he may face fines up to $$50,000.$

$3.$ Limited Track Record: As Marcus lacks experience leading an entire project himself, he does not have a proven history of successfully delivering completed construction work as a lead builder.

Given these risks, the bank must carefully assess Marcus's loan application and the viability of the proposed home subdivision project.

Based on the information provided, Marcus's current financial situation presents some challenges in obtaining an $$8$ million loan for his home subdivision project. Which of the following would be the most appropriate way for the bank to structure the loan approval?

Question $7$Answer

a$.$

Deny the loan entirely as Marcus currently lacks sufficient collateral and has no proven track record as a lead builder on projects of this size.

b$.$

Approve a lower loan amount of $$2\mathrm{.}5$ million that is fully collateralized by the $$2\mathrm{.}5$ million in assets Marcus currently has pledged.

c$.$

Approve the full $$8$ million loan contingent on Marcus partnering with another builder who can provide additional collateral and has a established record of leading similar projects.

d$.$

Approve the full $$8$ million loan amount unsecured, given Marcus's $12$ years of industry experience.