Question 1

SBAExpress loans typically are between five and ten years, but loan maturities for fixed assets can be up to 25 years and an average SBAExpress loan is $50,000.

Accepted Answer

A) True 
 B)False

Question 2

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

Accepted Answer

A)  the short-term loan. 
B)  the line of credit agreement. 
C)  floor planning. 
D)  the unsecured term loan.

Question 3

A recent survey by the NFIB found that 41 percent of small business owners say that the lack of capital is an impediment to the growth of their companies.

Accepted Answer

A) True 
 B)False

Question 4

Most equipment vendors encourage business owners to purchase their equipment by offering to finance the purchase and this method of financing is similar to trade credit.

Accepted Answer

A) True 
 B)False

Question 5

Because of the risk/return tradeoff, small businesses that borrow money repay it with interest at the:

Accepted Answer

A)  prime interest rate. 
B)  prime interest rate minus a few percentage points. 
C)  prime interest rate plus a few percentage points. 
D)  lender's cost of capital.

Question 6

After an entrepreneur invests his own money for startup, he or she will typically seek additional financing from friends and family next.

Accepted Answer

A) True 
 B)False

Question 7

Venture capital companies invest only in companies in the startup phase.

Accepted Answer

A) True 
 B)False

Question 8

Which of the following represents capital?

Accepted Answer

A)  Inventory 
B)  Equipment and machinery 
C)  Cash 
D)  All of the above

Question 9

Although there is no limit on the amount of stock it can buy, a typical venture capital firm will purchase less than ________ percent of the ownership in a small firm.

Accepted Answer

A)  21 
B)  50 
C)  70 
D)  80

Question 10

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

Accepted Answer

A)  Discounted installment contracts 
B)  Trade credit 
C)  Installment loans 
D)  Floor planning

Question 11

The advance rate on inventory-based loans is usually between 10 to 50 percent, but a business pledging high-quality accounts receivable as collateral may be able to negotiate up to an ________ percent advance rate.

Accepted Answer

A)  55 
B)  65 
C)  75 
D)  85

Question 12

Your text describes a variety of common sources of equity capital. Outline and briefly describe five.

Accepted Answer

The answer of Your text describes a variety of common...

Question 13

About ________ percent of SBA-backed loans go to start-up companies.

Accepted Answer

A)  59 
B)  49 
C)  29 
D)  9

Question 14

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.

Accepted Answer

A) True 
 B)False

Question 15

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

Accepted Answer

The answer of What is asset-based borrowing? Explain the two...

Question 16

Asset-based borrowing enables a small company to borrow money by pledging otherwise idle assets such as accounts receivable and inventory.

Accepted Answer

A) True 
 B)False

Question 17

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

Accepted Answer

A)  prime rate 
B)  margin rate 
C)  advance rate 
D)  discounted rate

Question 18

Angels are an excellent source of ________ money, often willing to wait ________ years or longer to cash out their investment.

Accepted Answer

A)  immediate; 5 
B)  patient: 7 
C)  long-term; 10 
D)  passive; 20

Question 19

To reduce the paperwork required and speed up its loan application process, the SBA has instituted several programs which allow small businesses to benefit due to reduced response time.

Accepted Answer

A) True 
 B)False

Question 20

In 2007, the SBA launched the Patriot Express loan program, which is designed to assist some of the nation's 25 million ________ who want to become entrepreneurs.

Accepted Answer

A)  veterans and their spouses or widows 
B)  women 
C)  minorties 
D)  corporate cast-offs

Exam 13: Sources of Financing: Debt and Equity

SBAExpress loans typically are between five and ten years, but loan maturities for fixed assets can be up to 25 years and an average SBAExpress loan is $50,000.

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

A recent survey by the NFIB found that 41 percent of small business owners say that the lack of capital is an impediment to the growth of their companies.

Most equipment vendors encourage business owners to purchase their equipment by offering to finance the purchase and this method of financing is similar to trade credit.

Because of the risk/return tradeoff, small businesses that borrow money repay it with interest at the:

After an entrepreneur invests his own money for startup, he or she will typically seek additional financing from friends and family next.

Venture capital companies invest only in companies in the startup phase.

Which of the following represents capital?

Although there is no limit on the amount of stock it can buy, a typical venture capital firm will purchase less than ________ percent of the ownership in a small firm.

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

The advance rate on inventory-based loans is usually between 10 to 50 percent, but a business pledging high-quality accounts receivable as collateral may be able to negotiate up to an ________ percent advance rate.

Your text describes a variety of common sources of equity capital. Outline and briefly describe five.

About ________ percent of SBA-backed loans go to start-up companies.

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.

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

Asset-based borrowing enables a small company to borrow money by pledging otherwise idle assets such as accounts receivable and inventory.

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

Angels are an excellent source of money, often willing to wait years or longer to cash out their investment.

To reduce the paperwork required and speed up its loan application process, the SBA has instituted several programs which allow small businesses to benefit due to reduced response time.

In 2007, the SBA launched the Patriot Express loan program, which is designed to assist some of the nation's 25 million ________ who want to become entrepreneurs.