Certified Government Financial Manager (CGFM) 2025 – 400 Free Practice Questions to Pass the Exam

The definition of "extension of credit" in the context of governmental loans refers specifically to the practice of providing loans via intermediary banks or financial institutions, where these loans are backed or guaranteed by the government. This arrangement allows borrowers to receive financial assistance with a safety net provided by the government, thereby reducing the risk for lenders and facilitating access to credit for individuals or entities that may not qualify for traditional loans due to various factors such as credit history.

This method of loan issuance enables government entities to make funds available to various sectors, such as education, healthcare, or small businesses, all while maintaining a level of control and assurance through the backing of the government. Through this structure, borrowers can benefit from potentially lower interest rates and more favorable terms than they might find in the private loan market.

In contrast, while the other options touch on various aspects of financial assistance, they do not accurately encompass the concept of “extension of credit” as it pertains to governmental involvement and guarantees that facilitate lending through intermediaries. For instance, providing loans for higher education is a specific application of credit but does not represent the broader definition. Similarly, offering financial assistance without government backing or providing grants without repayment are both distinct from the concept of extending credit as they either lack the governmental guarantee