Question 1

Leasing is an effective way to reduce long-term capital requirements for a small business.

Accepted Answer

A) True 
 B)False  True

Question 2

A small business that uses factoring:

Accepted Answer

A) pledges its accounts receivable as collateral to obtain a loan from a financial institution. 
B) relies on a third-party consultant to apply for SBA-guaranteed loans. 
C) sells its accounts receivable to a third party to get the capital it needs. 
D) borrows money from lenders by offering them the option to convert the loan into stock in the company. 
A) pledges its accounts receivable as collateral to obtain a loan from a financial institution. 
B) relies on a third-party consultant to apply for SBA-guaranteed loans. 
C) sells its accounts receivable to a third party to get the capital it needs. 
D) borrows money from lenders by offering them the option to convert the loan into stock in the company. C

Question 3

A ________ is a nonprofit organization licensed by the SBA and designed to promote economic growth in local communities.

Accepted Answer

A) FDC 
B) CDC 
C) GDC 
D) RDC 
A) FDC 
B) CDC 
C) GDC 
D) RDC B

Question 4

An entrepreneur seeking an SBA loan guarantee can cut out a tremendous amount of time and paperwork by working with a bank that is either a certified or a preferred lender.

Accepted Answer

A) True 
 B)False

Question 5

The Small Business Innovation Research Program was started by the National Science Foundation and spread to 10 other federal agencies with an annual budget in excess of $100 million.

Accepted Answer

A) True 
 B)False

Question 6

When a small business is refused a loan because it is not profitable and deemed a poor credit risk,the owner can usually turn to ________ as a source of short-term funds.

Accepted Answer

A) venture capital companies 
B) trade credit 
C) stockbrokers 
D) loans from insurance companies 
A) venture capital companies 
B) trade credit 
C) stockbrokers 
D) loans from insurance companies

Question 7

Typical short term loans are for:

Accepted Answer

A) purchase of more inventory. 
B) purchase of computers. 
C) have positive cash to pay other debts. 
D) All of the above 
A) purchase of more inventory. 
B) purchase of computers. 
C) have positive cash to pay other debts. 
D) All of the above

Question 8

The loan ceiling for the International Trade Loan Program is

Accepted Answer

A) $500,000. 
B) $2 million. 
C) $1 million. 
D) $100,000. 
A) $500,000. 
B) $2 million. 
C) $1 million. 
D) $100,000.

Question 9

What is asset-based borrowing? Explain the two major types of asset-based borrowing,including the pros and cons of each type.

Accepted Answer

Asset-based lenders,which are usually sm

Question 10

A line of credit means:

Accepted Answer

A) the company has access to unlimited funds. 
B) a line of credit is the same as long term loan. 
C) a line of credit remains active forever. 
D) None of the above 
A) the company has access to unlimited funds. 
B) a line of credit is the same as long term loan. 
C) a line of credit remains active forever. 
D) None of the above

Question 11

Janis Reardon is in the process of launching a craft shop.Her biggest supplier,Lothrop's Craft Supply,agrees to sell her the inventory she needs to stock her store on a delayed payment schedule.Janis is using what type of financing?

Accepted Answer

A) Line of credit 
B) Floor planning 
C) Trade credit 
D) Asset-based borrowing 
A) Line of credit 
B) Floor planning 
C) Trade credit 
D) Asset-based borrowing

Question 12

Term loans impose restrictions called:

Accepted Answer

A) loan boundaries. 
B) covenants. 
C) financial limits. 
D) margins. 
A) loan boundaries. 
B) covenants. 
C) financial limits. 
D) margins.

Question 13

Unsecured term loans typically involve very specific terms which may limit the owner's freedom to make financial decisions.

Accepted Answer

A) True 
 B)False

Question 14

Typically,a commercial bank will lend a small business owner 100% of the value of accounts receivable pledged as collateral.

Accepted Answer

A) True 
 B)False

Question 15

The average interest rates on SBA-guaranteed loans is:

Accepted Answer

A) prime-minus-2-percent. 
B) 2 percent. 
C) prime-plus-2-percent. 
D) 7 percent. 
A) prime-minus-2-percent. 
B) 2 percent. 
C) prime-plus-2-percent. 
D) 7 percent.

Question 16

Explain the role of commercial banks as source of debt capital for small businesses.What types of financing are available from commercial banks?

Accepted Answer

Commercial banks are the very heart of t

Question 17

The most common method used by commercial finance companies to provide credit to small businesses is:

Accepted Answer

A) asset-based. 
B) insurance-based. 
C) unsecured lines of credit or "character loans." 
D) balance-sheet based. 
A) asset-based. 
B) insurance-based. 
C) unsecured lines of credit or "character loans." 
D) balance-sheet based.

Question 18

Start-up companies often use trade credit from suppliers to buy equipment and fixtures for their business.

Accepted Answer

A) True 
 B)False

Question 19

SBICs:

Accepted Answer

A) were chartered by the SBA to help start-up companies find private financing from commercial banks and finance companies. 
B) provide short-term debt-based capital to small businesses through the sale of the debt to private investors. 
C) cannot invest in or lend money to a business for more than five years. 
D) were created by the Small Business Investment Act to use a combination of private and federal guaranteed debt to provide long-term capital to small businesses. 
A) were chartered by the SBA to help start-up companies find private financing from commercial banks and finance companies. 
B) provide short-term debt-based capital to small businesses through the sale of the debt to private investors. 
C) cannot invest in or lend money to a business for more than five years. 
D) were created by the Small Business Investment Act to use a combination of private and federal guaranteed debt to provide long-term capital to small businesses.

Question 20

Savings and loan associations specialize in loans for the purchase of and for working capital.

Accepted Answer

A) True 
 B)False

Exam 15: Sources of Debt Financing

Leasing is an effective way to reduce long-term capital requirements for a small business.

A small business that uses factoring:

A ________ is a nonprofit organization licensed by the SBA and designed to promote economic growth in local communities.

An entrepreneur seeking an SBA loan guarantee can cut out a tremendous amount of time and paperwork by working with a bank that is either a certified or a preferred lender.

The Small Business Innovation Research Program was started by the National Science Foundation and spread to 10 other federal agencies with an annual budget in excess of $100 million.

When a small business is refused a loan because it is not profitable and deemed a poor credit risk,the owner can usually turn to ________ as a source of short-term funds.

Typical short term loans are for:

The loan ceiling for the International Trade Loan Program is

What is asset-based borrowing? Explain the two major types of asset-based borrowing,including the pros and cons of each type.

A line of credit means:

Janis Reardon is in the process of launching a craft shop.Her biggest supplier,Lothrop's Craft Supply,agrees to sell her the inventory she needs to stock her store on a delayed payment schedule.Janis is using what type of financing?

Term loans impose restrictions called:

Unsecured term loans typically involve very specific terms which may limit the owner's freedom to make financial decisions.

Typically,a commercial bank will lend a small business owner 100% of the value of accounts receivable pledged as collateral.

The average interest rates on SBA-guaranteed loans is:

Explain the role of commercial banks as source of debt capital for small businesses.What types of financing are available from commercial banks?

The most common method used by commercial finance companies to provide credit to small businesses is:

Start-up companies often use trade credit from suppliers to buy equipment and fixtures for their business.

SBICs:

Savings and loan associations specialize in loans for the purchase of and for working capital.

Entrepreneurs: the Driving Force Behind Small Business

Strategic Management and the Entrepreneur

Choosing a Form of Ownership

Franchising and the Entrepreneur

Buying an Existing Business

Conducting a Feasibility Analysis and Crafting a Winning Business Plan

Creating a Solid Financial Plan

Managing Cash Flow

Building a Guerrilla Marketing Plan

Creative Use of Advertising and Promotion

Pricing and Credit Strategies

Global Marketing Strategies

E-Commerce and Entrepreneurship

Sources of Equity Financing

Location,layout,and Physical Facilities

Supply Chain Management

Managing Inventory

Staffing and Leading a Growing Company

Management Succession and Risk Management Strategies in the Family Business

Ethics and Social Responsibility: Doing the Right Thing

The Legal Environment: Business Law and Government Regulation

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