Exam 17: Sources of Debt Financing

Revolving loan funds (RLFs)combine private and public funds to make loans to small businesses,often at below-market interest rates.

A business owner does not pay interest on a floor-planned item in inventory until it is sold.

Commercial banks are lenders of last resort for small businesses.

Some credit unions are now extending personal loans to members,often without personal collateral,in order to start a business.

Credit unions are best known for making consumer and car loans.

Explain how a small business can use factoring to raise funds.What are the advantages and dangers of this type of financing?

Banks focus on a small business's ability to generate a positive cash flow when lending money.

An amortization schedule is:

Inventory-only deals are the easiest form of asset-based financing to obtain because banks like to have "tangible" assets backing a loan.

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.

In installment loans,the loan's ________ schedule typically coincides with the length of the equipment's usable life.

Small manufacturers (for example)needing money for fixed assets with long repayment schedules have access to an attractive,relatively inexpensive source of funds called:

Generally speaking,all growing companies need to borrow money at some point.

The SBA's ________ program offers short-term capital to growing companies seeking to finance seasonal buildups in inventory or accounts receivable.

A line of credit means:

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.

Which of the following factors do banks focus on when lending money to a company?

Loans from a stockbrokerage on the small business owner's portfolio can be "called" to be paid within a matter of days or even hours.

SBICs provide only debt financing to small businesses.

In asset-based borrowing,the ________ is the percentage of an asset's value that a lender will lend.