Question: You are negotiating financing with a commercial lender and it has proposed the following: The maximum amounts that can be drawn on the operating loan

You are negotiating financing with a commercial lender and it has proposed the following: “The maximum amounts that can be drawn on the operating loan are subject to margin limitations based on the Company’s trade receivables and inventory levels. The operating loan is repayable upon demand.”
Required:
Explain what the lender is proposing and the implications these terms will have for the amount of the loan and its presentation for accounting purposes.

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