Exam 13: Sources of Financing: Debt and Equity

Networking through personal contacts and the Internet is one of the best ways to find angels, who usually prefer to invest in local businesses operating in industries they know something about.

In an initial public offering, the underwriter, or investment banker, serves to ________.

The most common type of commercial bank loan granted to small businesses is ________.

________ is/are a method of financing frequently used by retailers of "big ticket items" such as autos.

The largest single source of external equity capital for small businesses is ________.

If an entrepreneur needs a relatively small amount of money to launch a company, angels are a primary source of funds.

Venture capitalists look for ________ as the most important ingredient in the success of any business.

The single most important ingredient in making a successful initial public offering is selecting a capable underwriter to manage the process.

Unlike venture capital firms and most other institutional investors, angels typically invest in businesses in their earliest phases, providing the seed capital needed to get the business going.

Rather than relying primarily on a single source of funds as they have in the past, entrepreneurs today must piece together their capital from multiple sources, a method known as layered financing.

Private investors look to earn the return on their investments in a business through the increased value of the business, not through dividends and interest.

A company pledging its inventory, accounts receivables, or fixtures as collateral for a loan is using ________.

A ________ is an agreement with a bank that allows a small business to borrow up to a predetermined specified amount during the year without making an application each time.

Before entering into any partnership arrangement, entrepreneurs must consider ________.

The primary disadvantage of equity capital is that the entrepreneur ________.

Explain the difference between equity and debt capital. What advantages and disadvantages characterize each?

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