Question 1

Entrepreneurs have access to two different types of capital, ________ and ________ .

Accepted Answer

A)   debt; equity
B)   debt; retained
C)   debt; leveraged
D)   layered; equityE) A) and C)
F) C) and D)

Question 2

________ were created by the SBA to provide loans under $100,000 that are normally shunned by banks.

Accepted Answer

A)   Microloans
B)   Preferred loans
C)   Seasonal lines of credit
D)   Disaster loansE) All of the above
F) A) and C)

Question 3

Banks prefer to make loans to business start-ups because although the risk level is higher, the potential returns are also much higher.

Accepted Answer

A) True 
 B)False

Question 4

The ________ provides loans to entrepreneurs in economically challenged communities and viewed as high-risk borrowers.

Accepted Answer

A)   Certified Development Company Program
B)   Patriot Express Program
C)   Community Express Program
D)   7(
A)   Loan Guarantee ProgramE) None of the above
F) A) and B)

Question 5

Crowd funding is a method of raising capital that taps the power of social networking and allows entrepreneurs to post their elevator pitches and proposed investment terms on specialized Web sites and raise money from ordinary people who invest as little as $100.

Accepted Answer

A) True 
 B)False

Question 6

The Economic Development Administration offers loan guarantees to create new businesses in economically depressed areas with below-average incomes and high unemployment rates.

Accepted Answer

A) True 
 B)False

Question 7

Crowd funding is a process in which entrepreneurs tap their personal savings and use creative, low-cost start-up methods to launch their businesses.

Accepted Answer

A) True 
 B)False

Question 8

The SBA's Section 504 Certified Development Company Program (CDC), which provides long-term, fixed-asset financing, is designed to encourage small businesses to expand their facilities and to create jobs.

Accepted Answer

A) True 
 B)False

Question 9

Which of the following is a characteristic of a typical private placement of debt?

Accepted Answer

A)   It carries a variable interest rate.
B)   Its maturity is shorter than most bank loans.
C)   Because of the higher risk, more restrictions are imposed on the borrower than with a comparable bank loan.
D)   It operates much like a bond, but its terms are tailored to the borrower's individual needs, as a loan would be.E) None of the above
F) B) and C)

Question 10

Entrepreneurs needing between $100,000 and $3 million in the current financial environment will likely find acquiring financing to be:

Accepted Answer

A)   challenging.
B)   confusing.
C)   attainable.
D)   easy.E) None of the above
F) B) and C)

Question 11

The Tanning Parlor is in the middle of the busy season. Owner Sunny Bright has hired extra help and encountered some unexpected repairs that have left her short of operating capital. What type of financing would Sunny most likely use in this situation?

Accepted Answer

A)   A line of credit
B)   Floor planning
C)   A discounted installment contract
D)   Trade creditE) B) and D)
F) A) and D)

Question 12

The most important ingredient that venture capitalists look for in judging the potential success of a small business is a competent management team.

Accepted Answer

A) True 
 B)False

Question 13

The most common method used by commercial finance companies to provide credit to small businesses is:

Accepted Answer

A)   asset based.
B)   insurance based.
C)   unsecured lines of credit or "character loans."
D)   profitability based.E) B) and C)
F) C) and D)

Question 14

SBICs:

Accepted Answer

A)   were chartered by the SBA to help startup companies find private financing from commercial banks and finance companies.
B)   provide short-term debt-based capital to small businesses through the sale of the debt to private investors.
C)   cannot invest in or lend money to a business for more than five years.
D)   were created by the Small Business Investment Act to use a combination of private and federal guaranteed debt to provide long-term capital to small businesses.E) A) and B)
F) A) and C)

Question 15

The primary disadvantage of equity capital is that the entrepreneur:

Accepted Answer

A)   must repay it at some point with interest.
B)   must give up some-perhaps most-of the ownership in the business to outsiders.
C)   experiences the disadvantage of the risk/return tradeoff in the form of higher interest rates.
D)   B and C aboveE) B) and C)
F) C) and D)

Question 16

Regulation D rules minimize the expense and the time required to raise equity capital for small businesses by simplifying or eliminating the requirement for registering the offering with the SEC.

Accepted Answer

A) True 
 B)False

Question 17

A loan from a stockbroker based on the stocks and bonds in the customer's portfolio:

Accepted Answer

A)   tends to be at a higher rate than a bank but easier to obtain.
B)   can be "called" for payment in a matter of hours or days.
C)   is for a maximum of $50,000.
D)   has a fixed repayment schedule and must be paid within 90 days.E) None of the above
F) B) and D)

Question 18

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

Accepted Answer

A) True 
 B)False

Question 19

The second most popular SBA loan program is the ________ and designed to encourage small businesses to purchase fixed assets, expand their facilities, and create jobs. :

Accepted Answer

A)   7(
A)   Loan Guarantee Program.
B)   Section 504 Certified Development Company Program.
C)   Community Advantage Loan Program
D)   Microloan Program.E) A) and B)
F) C) and D)

Question 20

Vendors and suppliers often are willing to finance a small business owner's purchase of goods for 30 to 60 days, interest free, which is usually easier for small businesses than obtaining a bank loan.

Accepted Answer

A) True 
 B)False

Exam 13: Sources of Financing: Debt and Equity

Banks prefer to make loans to business start-ups because although the risk level is higher, the potential returns are also much higher.

Correct AnswerverifiedShow Answer

The SBA's Section 504 Certified Development Company Program (CDC), which provides long-term, fixed-asset financing, is designed to encourage small businesses to expand their facilities and to create jobs.

Correct AnswerverifiedShow Answer

The primary disadvantage of equity capital is that the entrepreneur:

Correct AnswerverifiedShow Answer

Crowd funding is a process in which entrepreneurs tap their personal savings and use creative, low-cost start-up methods to launch their businesses.

Correct AnswerverifiedShow Answer

________ were created by the SBA to provide loans under $100,000 that are normally shunned by banks.

Correct AnswerverifiedShow Answer

The most common method used by commercial finance companies to provide credit to small businesses is:

Correct AnswerverifiedShow Answer

The Economic Development Administration offers loan guarantees to create new businesses in economically depressed areas with below-average incomes and high unemployment rates.

Correct AnswerverifiedShow Answer

Entrepreneurs needing between $100,000 and $3 million in the current financial environment will likely find acquiring financing to be:

Correct AnswerverifiedShow Answer

The second most popular SBA loan program is the ________ and designed to encourage small businesses to purchase fixed assets, expand their facilities, and create jobs. :

Correct AnswerverifiedShow Answer

A loan from a stockbroker based on the stocks and bonds in the customer's portfolio:

Correct AnswerverifiedShow Answer

Crowd funding is a method of raising capital that taps the power of social networking and allows entrepreneurs to post their elevator pitches and proposed investment terms on specialized Web sites and raise money from ordinary people who invest as little as $100.

Correct AnswerverifiedShow Answer

Vendors and suppliers often are willing to finance a small business owner's purchase of goods for 30 to 60 days, interest free, which is usually easier for small businesses than obtaining a bank loan.

Correct AnswerverifiedShow Answer

Which of the following is a characteristic of a typical private placement of debt?

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

The ________ provides loans to entrepreneurs in economically challenged communities and viewed as high-risk borrowers.

Correct AnswerverifiedShow Answer

The Tanning Parlor is in the middle of the busy season. Owner Sunny Bright has hired extra help and encountered some unexpected repairs that have left her short of operating capital. What type of financing would Sunny most likely use in this situation?

Correct AnswerverifiedShow Answer

Entrepreneurs have access to two different types of capital, ________ and ________ .

Correct AnswerverifiedShow Answer

Regulation D rules minimize the expense and the time required to raise equity capital for small businesses by simplifying or eliminating the requirement for registering the offering with the SEC.

Correct AnswerverifiedShow Answer

SBICs:

Correct AnswerverifiedShow Answer

The most important ingredient that venture capitalists look for in judging the potential success of a small business is a competent management team.

Correct AnswerverifiedShow Answer

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Entrepreneurs have access to two different types of capital, and .

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