To meet the initial $20,000 financial security requirement, a new agency may provide ARC with which instrument?

• A. A personal guarantee
• B. A cashier's check
• C. A letter of credit
• D. A surety bond

Answer: (C)

A bank-backed instrument that provides a ready, irrevocable guarantee of funds is the best fit for ARC’s initial security needs. A letter of credit creates an irrevocable bank guarantee up to a set amount, allowing ARC to draw on it if there are charges or shortfalls. This gives ARC immediate access to funds and shifts the risk to the bank, rather than relying on the agency’s own assets or cash on hand.

Personal guarantees depend on an individual’s assets and are less reliable for ARC. A cashier’s check is funds actually paid upfront but is a fixed amount and not a revolving or easily adjustable security facility. A surety bond offers protection but involves a claims process and may not provide the same immediacy as a letter of credit. Hence, the letter of credit best satisfies the initial $20,000 security requirement.