Exam 12: A Firms Sources of Financing

Business loans are the primary source of financing for start-ups.

Private placement is the selling of shares to select venture capitalists.

The private sale of a business's shares is regulated by the Financial Services Board.

Match the term with its definition. a.Balloon payment b.Business angels c.Chattel mortgage d.Crowdfunding e.Factoring f.Initial public offering g.Loan covenants h.Private placement i.Real estate mortgage j.Venture capitalist -What should an entrepreneur do before approaching an investor?

Barry needs financing to start his inner-city venture.His goal is to provide part-time employment for at-risk youths to keep them off the streets and engaged in learning marketable skills.Barry may find some assistance from:

Even though Evan's company is a corporation, the bank imposed a loan covenant that required Evan to:

Match the term with its definition. a.Asset-based loan b.Basis point c.Chattel mortgage d.Equipment loan e.JIBAR (Johannesburg Inter-Bank Agreed Rate) f.Line of credit g.Prime rate h.Purchase-order financing i.Term loan -1/100th of 1 per cent when quoting an interest rate.

Although not the primary source of financing for most small business start-ups, another source of early financing is:

Lesedi is trying to decide between the use of debt and the use of equity to finance her young business.She should remember that:

Ismail Alternative Power (Pty) Ltd., a company developing solar panels is applying for a loan.The research the company has done for the manufacturing process would be a(n) _____ asset for the loan evaluation.

A source of early-stage capital financing for a company is financing from commercial banks.

In groups of business angels:

Discuss two methods of selling shares.

The amount of trade credit available to a new company is dependent on the supplier's confidence in the business and not the type of business.

If a business finances with equity rather than with debt, it will bear no interest expense and thus yield greater net income.

A balloon payment:

Stefan owns a lumber yard and has a R500 000 purchase order from a construction company.His cost of goods sold for this order is R300 000.Because his company needs working capital, the most logical loan for the lumberyard would be to use ________.

Florence wants to obtain a loan for a large colour laser printer for her copy shop.Since the printer will last approximately eight years, the ideal loan would be a _____ loan.

The Department of Trade and Industry guarantees loans for small businesses.

A company that has over 100 employees with locations in several states is typically the type of company in which business angels make an investment.