Question 1

Even companies whose financial statements are too weak to produce other types of loans can get asset-based loans.

Accepted Answer

A) True 
 B)False

Question 2

Asset-based financing:

Accepted Answer

A) is efficient since the small business borrows only the money it needs. 
B) provides less borrowing capacity than inventory-based financing. 
C) is more expensive than other types of financing. 
D) is less desirable than inventory-only deals to bankers. 
A) is efficient since the small business borrows only the money it needs. 
B) provides less borrowing capacity than inventory-based financing. 
C) is more expensive than other types of financing. 
D) is less desirable than inventory-only deals to bankers.

Question 3

Asset-based financing is an efficient means of borrowing because the business only pays for the capital it actually needs and uses.

Accepted Answer

A) True 
 B)False

Question 4

Commercial finance companies offer many of the same types of loans as commercial banks,but they are willing to tolerate more risk in their loan portfolios.

Accepted Answer

A) True 
 B)False

Question 5

Credit cards are a ready source of temporary financing that can carry a company through the start-up phase until it begins generating positive cash flow.

Accepted Answer

A) True 
 B)False

Question 6

Bootstrap financing is only available to a select few small businesses that must first meet a wide variety of qualifications.

Accepted Answer

A) True 
 B)False

Question 7

Asset-based lenders avoid inventory-only deals;they prefer to make loans backed by inventory and:

Accepted Answer

A) experienced management. 
B) good market reputation. 
C) more secure accounts receivable. 
D) All of the above 
A) experienced management. 
B) good market reputation. 
C) more secure accounts receivable. 
D) All of the above

Question 8

The Community Development Block Grants (CDBGs)are extended to cities and towns that,in turn,lend or grant money to entrepreneurs to start small businesses that will strengthen the local economy.

Accepted Answer

A) True 
 B)False

Question 9

Sunny Bright's The Tanning Parlor is in the middle of its busy season.The hiring of extra help,some unexpected repairs on equipment,etc. ,has led to a shortage of operating capital.What type of financing would Sunny most likely use in this situation?

Accepted Answer

A) Line of credit 
B) Floor planning 
C) A discounted installment contract 
D) An asset-based loan 
A) Line of credit 
B) Floor planning 
C) A discounted installment contract 
D) An asset-based loan

Question 10

Commercial banks are lenders of last resort for small businesses.

Accepted Answer

A) True 
 B)False

Question 11

Capital Access Programs (CAPs)that are designed to encourage lending institutions to make loans to businesses that do not qualify for traditional financing.

Accepted Answer

A) True 
 B)False

Question 12

SBICs provide only debt financing to small businesses.

Accepted Answer

A) True 
 B)False

Question 13

The EDA makes low-interest loans to create new businesses in economically depressed areas with below-average incomes and high unemployment rates.

Accepted Answer

A) True 
 B)False

Question 14

Small Business Investment Companies (SBICs):

Accepted Answer

A) prefer to finance companies in later stages rather than "raw start-ups." 
B) only provide long-term debt financing to small businesses. 
C) cannot make their own investment decisions,which are controlled by the SBA. 
D) loan money through debentures not requiring regular interest payments. 
A) prefer to finance companies in later stages rather than "raw start-ups." 
B) only provide long-term debt financing to small businesses. 
C) cannot make their own investment decisions,which are controlled by the SBA. 
D) loan money through debentures not requiring regular interest payments.

Question 15

The ________ loan is based not on creditworthiness,but on the borrower's reputation and reliability.

Accepted Answer

A) line of credit 
B) discounted installment contract 
C) character 
D) SBA 
A) line of credit 
B) discounted installment contract 
C) character 
D) SBA

Question 16

Most SBIC loans are between $10,000 and $50,0000 and the loan term is longer than most banks allow.

Accepted Answer

A) True 
 B)False

Question 17

A boat retailer would most likely use a line of credit to finance the purchase of his inventory.

Accepted Answer

A) True 
 B)False

Question 18

Some of the reasons which small business owners should consider borrowing money are:

Accepted Answer

A) gaining market share. 
B) refinancing existing debt. 
C) taking advantage of cash discounts. 
D) All of the above 
A) gaining market share. 
B) refinancing existing debt. 
C) taking advantage of cash discounts. 
D) All of the above

Question 19

The loans of commercial finance companies to small businesses:

Accepted Answer

A) tend to be for less than a commercial bank but at a lower interest rate. 
B) are offered based on the company's balance sheet. 
C) tend to be at a lower interest rate but are harder to get. 
D) are in many of the same forms as commercial bank offers. 
A) tend to be for less than a commercial bank but at a lower interest rate. 
B) are offered based on the company's balance sheet. 
C) tend to be at a lower interest rate but are harder to get. 
D) are in many of the same forms as commercial bank offers.

Question 20

SBA loans do not carry special deals or interest rates and typically are set at prime plus 2.25% for loans under seven years in length.

Accepted Answer

A) True 
 B)False

Exam 15: Sources of Debt Financing

Even companies whose financial statements are too weak to produce other types of loans can get asset-based loans.

Asset-based financing:

Asset-based financing is an efficient means of borrowing because the business only pays for the capital it actually needs and uses.

Commercial finance companies offer many of the same types of loans as commercial banks,but they are willing to tolerate more risk in their loan portfolios.

Credit cards are a ready source of temporary financing that can carry a company through the start-up phase until it begins generating positive cash flow.

Bootstrap financing is only available to a select few small businesses that must first meet a wide variety of qualifications.

Asset-based lenders avoid inventory-only deals;they prefer to make loans backed by inventory and:

The Community Development Block Grants (CDBGs)are extended to cities and towns that,in turn,lend or grant money to entrepreneurs to start small businesses that will strengthen the local economy.

Sunny Bright's The Tanning Parlor is in the middle of its busy season.The hiring of extra help,some unexpected repairs on equipment,etc. ,has led to a shortage of operating capital.What type of financing would Sunny most likely use in this situation?

Commercial banks are lenders of last resort for small businesses.

Capital Access Programs (CAPs)that are designed to encourage lending institutions to make loans to businesses that do not qualify for traditional financing.

SBICs provide only debt financing to small businesses.

The EDA makes low-interest loans to create new businesses in economically depressed areas with below-average incomes and high unemployment rates.

Small Business Investment Companies (SBICs):

The ________ loan is based not on creditworthiness,but on the borrower's reputation and reliability.

Most SBIC loans are between $10,000 and $50,0000 and the loan term is longer than most banks allow.

A boat retailer would most likely use a line of credit to finance the purchase of his inventory.

Some of the reasons which small business owners should consider borrowing money are:

The loans of commercial finance companies to small businesses:

SBA loans do not carry special deals or interest rates and typically are set at prime plus 2.25% for loans under seven years in length.

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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