10 exam-style questions with answers and explanations, straight from our 1,030-question bank. Tap an answer to check yourself. When you're ready, take the scored version in the free practice test.
These 10 free EDFP questions are organized by exam domain, so you can see how each part of the Economic Development Finance Professional blueprint is tested. Reveal the answer and explanation under each question.
An expanding manufacturer needs financing for an owner-occupied factory, production equipment, opening inventory and payroll. It requests a single SBA-backed loan for all four uses and meets the programs' other eligibility requirements. Which structure meets the request?
Correct answer: D - One 7(a) loan covering the property, equipment, inventory, and payroll.
An entitlement grantee proposes its only covered economic-development activity of the program year. CDBG assistance equals $42,000 per permanent full-time-equivalent job created or retained, and 65% of the jobs meet the low- and moderate-income jobs criteria. No public-benefit exclusion or goods-and-services alternative applies. How does the proposal fare under the jobs-based CDBG requirements?
Correct answer: A - The jobs objective and individual test are satisfied; the aggregate public-benefit test fails.
Sales and operating profit are rising at a manufacturer, yet operating cash flow has weakened. Profit margins and the number of days in receivables, inventory and payables have not changed. The company pays suppliers before collecting from customers. Which explanation fits this pattern?
Correct answer: C - The company has more dollars committed to its operating cycle.
Under a distributor's revolving-credit agreement, advances are limited to 80% of eligible receivables and a $600,000 commitment. The distributor has $360,000 outstanding. Of $600,000 in receivables, $100,000 consists of invoices more than 90 days old and is excluded; all remaining receivables are eligible. With no other collateral, reserves, restrictions or facility usage, how much more may the distributor draw?
Correct answer: B - $40,000
An established retailer collects its sales in cash, turns inventory quickly and pays suppliers later under agreed terms. Its current ratio is 0.78, but nothing is overdue and the cash forecast covers scheduled payments. A reviewer would decline renewal solely because current liabilities exceed current assets. The appropriate response is to:
Correct answer: C - Assess renewal against the cash-conversion timing and payment capacity under stressed conditions.
A neighborhood shopping center loses its anchor tenant. The remaining shops stay open, but their signed leases state that an anchor closure automatically replaces base rent with a lower, sales-based rent until a qualifying replacement anchor opens. The shops have begun paying that reduced rent. The sponsor leaves their full base rent in the pro forma and applies a vacancy allowance only to the anchor space. The lender should revise the cash-rent forecast by:
Correct answer: A - Using the shops' contractual reduced rent during the closure and separately forecasting the anchor's lease-up.
Overnight flooding damages a warehouse under construction. The engineer orders immediate shoring to prevent collapse onto an adjoining occupied property. The affected area is secured. An emergency permit allows shoring, while other construction remains suspended. The loan documents permit direct protective advances for verified stabilization costs. The sponsor submits one draw covering both shoring and interior finishes. The disbursement officer should:
Correct answer: D - Fund verified shoring costs directly and hold the interior-work portion.
An economic development lender is sizing a first-mortgage loan on a fully leased industrial property. Underwritten annual cash available for debt service is $540,000. The lender requires at least 1.35× debt-service coverage and caps the loan at 80% of the $4,500,000 appraised value. The proposed loan's annual debt-service constant is 10%, meaning annual principal and interest equal 10% of original principal. No other debt or loan limits apply. What is the largest loan that satisfies both requirements?
Correct answer: A - $3,600,000
“I can wait for the unpaid purchase price, but the note must be secured,” a seller tells the buyer. The buyer has committed all available closing cash. The senior lender permits a secured seller note only if neither principal nor interest is paid during its standstill period; interest may accrue. The seller accepts those terms, and verified projections support repayment afterward. Which term sheet preserves the agreement?
Correct answer: B - Closing cash plus a secured seller note deferring all payments until after the standstill.
Four years after a New Markets Tax Credit investment closes, the certified Community Development Entity (CDE) proposes to redeem the investor's qualified equity investment (QEI) and return its principal. The operating business remains eligible, and the CDE still meets the investment-use requirements. Which assessment applies to the proposed redemption?
Correct answer: B - CDE redemption is a separate recapture event, despite continuing eligibility and compliant investment use.
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