Exam 13: Sources of Financing: Debt and Equity

Term loans impose restrictions called ________.

In startup companies, raising capital can easily consume as much as one-half of the entrepreneur's time and take many months to complete.

The primary advantage of equity capital is ________.

Which of the following represents capital?

Loans made under the SBA's Disaster Loan Program carry below-market interest rates and are designed to provide assistance to small businesses that have been the victims of a variety of disasters, such as hurricanes, floods, earthquakes, and tornadoes.

The goal of the SEC's Regulation D is ________.

For small businesses, ________ are the very heart of the financial market, providing the greatest number and variety of loans to small companies.

When searching for capital to launch their companies, entrepreneurs should remember several "secrets" to successful financing. Which of the following is not one of those secrets?

Most companies that make Rule 506 offerings raise between ________ and ________ in capital.

One of the disadvantages of angels is that they are typically not willing to wait more than three years to cash out their investments.

An option for acquiring equity capital is for the entrepreneur to take on partner(s) however, it is important that she/he consider the impact of giving up some personal control over operations and sharing profits with others.

Few companies with less than $25 million in annual sales manage to go public successfully.

Mini-Case 13-1: "Where do I go now ...? Christine Hernandez is in the process of launching a restaurant. Christine has never owned her own restaurant before, but she has worked for two of the best restaurants in town. Starting out as a hostess, Christine developed a special knack for the business and quickly worked her way up to the job of manager. Her 18 years of experience have given her a solid foundation for running her own restaurant. Christine has worked with a counselor at a nearby Small Business Development Center and a counselor from the Service Corps of Retired Executives to prepare a business plan. She asked two other consultants and an accountant to review the plan and incorporated their suggestions into the finished product. When Christine took her plan to her bank however, the bank turned down her loan request of $165,000 citing the venture as "too risky, given the failure rate of restaurants." The bank acknowledged her experience as "a major asset," but said that it "could not expose itself to such risks in its portfolio." Christine heard the same story from three other banks. Christine is confident in her ability to manage her own restaurant successfully, and she is determined to get the financing she needs to launch it. -Review the various loan programs under the Small Business Administration designed to help finance businesses like Christine's. Which of these programs would most likely help Christine get the capital she needs?

Capital is any form of wealth employed to produce more wealth.

Typically, the entire process of going public takes ________, but it can take much longer if the issuing company is not properly prepared for the process.

Mini-Case 13-2: Bowden Brake Service Jim Bowden has been operating his business for some time now and thinks it is time to grow and expand. To compute the cost of expanding his existing business, Jim Bowden makes the following estimates: Adjacent lot $40,000 Metal prefab building 25,000 Hydraulic lifts 15,000 Tools and equipment 9,000 Parts and inventory 5,000 Additional operating expenses 55,000 TOTAL $149,000 -Explain to Jim the possible (and realistic) sources of capital for expansion. Where would you recommend that he go for the funds he needs? Why?

A typical venture capital firm seeks investments in the $20,000 to $50,000 range and annual returns of 35-50 percent over three to five years.

The "wait to go effective" is the time period when ________.

When evaluating a company as a potential investment target, venture capitalists look for all but which of the following?

A/An ________ is a private, for-profit organization that purchases equity positions in young businesses that will potentially produce returns of 300 to 500 percent over five to seven years.