Question 1

Term loans impose restrictions called:

Accepted Answer

A)  loan boundaries.
B)  covenants.
C)  financial limits.
D)  margins.

Question 2

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)  balance-sheet based.

Question 3

A ________ is a nonprofit organization licensed by the SBA and designed to promote economic growth in local communities.

Accepted Answer

A)  FDC
B)  CDC
C)  GDC
D)  RDC B

Question 4

When a small business is refused a loan because it is not profitable and deemed a poor credit risk,the owner can usually turn to ________ as a source of short-term funds.

Accepted Answer

A)  venture capital companies
B)  trade credit
C)  stockbrokers
D)  loans from insurance companies

Question 5

An entrepreneur seeking an SBA loan guarantee can cut out a tremendous amount of time and paperwork by working with a bank that is either a certified or a preferred lender.

Accepted Answer

A) True 
 B)False

Question 6

Typically,a commercial bank will lend a small business owner 100% of the value of accounts receivable pledged as collateral.

Accepted Answer

A) True 
 B)False

Question 7

Typical short term loans are for:

Accepted Answer

A)  purchase of more inventory.
B)  purchase of computers.
C)  have positive cash to pay other debts.
D)  All of the above

Question 8

Start-up companies often use trade credit from suppliers to buy equipment and fixtures for their business.

Accepted Answer

A) True 
 B)False

Question 9

The Small Business Innovation Research Program was started by the National Science Foundation and spread to 10 other federal agencies with an annual budget in excess of $100 million.

Accepted Answer

A) True 
 B)False

Question 10

A small business that uses factoring:

Accepted Answer

A)  pledges its accounts receivable as collateral to obtain a loan from a financial institution.
B)  relies on a third-party consultant to apply for SBA-guaranteed loans.
C)  sells its accounts receivable to a third party to get the capital it needs.
D)  borrows money from lenders by offering them the option to convert the loan into stock in the company. C

Question 11

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

Accepted Answer

Asset-based lenders,which are usually sm...

Question 12

The loan ceiling for the International Trade Loan Program is

Accepted Answer

A)  $500,000.
B)  $2 million.
C)  $1 million.
D)  $100,000.

Question 13

The average interest rates on SBA-guaranteed loans is:

Accepted Answer

A)  prime-minus-2-percent.
B)  2 percent.
C)  prime-plus-2-percent.
D)  7 percent.

Question 14

SBICs:

Accepted Answer

A)  were chartered by the SBA to help start-up 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.

Question 15

Explain the role of commercial banks as source of debt capital for small businesses.What types of financing are available from commercial banks?

Accepted Answer

Commercial banks are the very heart of t...

Question 16

Savings and loan associations specialize in loans for the purchase of and for working capital.

Accepted Answer

A) True 
 B)False

Question 17

Janis Reardon is in the process of launching a craft shop.Her biggest supplier,Lothrop's Craft Supply,agrees to sell her the inventory she needs to stock her store on a delayed payment schedule.Janis is using what type of financing?

Accepted Answer

A)  Line of credit
B)  Floor planning
C)  Trade credit
D)  Asset-based borrowing

Question 18

Leasing is an effective way to reduce long-term capital requirements for a small business.

Accepted Answer

A) True 
 B)False  True

Question 19

A line of credit means:

Accepted Answer

A)  the company has access to unlimited funds.
B)  a line of credit is the same as long term loan.
C)  a line of credit remains active forever.
D)  None of the above

Question 20

Unsecured term loans typically involve very specific terms which may limit the owner's freedom to make financial decisions.

Accepted Answer

A) True 
 B)False

Exam 15: Sources of Debt Financing

Term loans impose restrictions called:

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

A ________ is a nonprofit organization licensed by the SBA and designed to promote economic growth in local communities.

Correct AnswerverifiedB

When a small business is refused a loan because it is not profitable and deemed a poor credit risk,the owner can usually turn to ________ as a source of short-term funds.

Correct AnswerverifiedShow Answer

An entrepreneur seeking an SBA loan guarantee can cut out a tremendous amount of time and paperwork by working with a bank that is either a certified or a preferred lender.

Correct AnswerverifiedShow Answer

Typically,a commercial bank will lend a small business owner 100% of the value of accounts receivable pledged as collateral.

Correct AnswerverifiedShow Answer

Typical short term loans are for:

Correct AnswerverifiedShow Answer

Start-up companies often use trade credit from suppliers to buy equipment and fixtures for their business.

Correct AnswerverifiedShow Answer

The Small Business Innovation Research Program was started by the National Science Foundation and spread to 10 other federal agencies with an annual budget in excess of $100 million.

Correct AnswerverifiedShow Answer

A small business that uses factoring:

Correct AnswerverifiedC

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

Correct AnswerverifiedAsset-based lenders,which are usually sm...View AnswerShow Answer

The loan ceiling for the International Trade Loan Program is

Correct AnswerverifiedShow Answer

The average interest rates on SBA-guaranteed loans is:

Correct AnswerverifiedShow Answer

SBICs:

Correct AnswerverifiedShow Answer

Explain the role of commercial banks as source of debt capital for small businesses.What types of financing are available from commercial banks?

Correct AnswerverifiedCommercial banks are the very heart of t...View AnswerShow Answer

Savings and loan associations specialize in loans for the purchase of and for working capital.

Correct AnswerverifiedShow Answer

Janis Reardon is in the process of launching a craft shop.Her biggest supplier,Lothrop's Craft Supply,agrees to sell her the inventory she needs to stock her store on a delayed payment schedule.Janis is using what type of financing?

Correct AnswerverifiedShow Answer

Leasing is an effective way to reduce long-term capital requirements for a small business.

Correct AnswerverifiedTrue

A line of credit means:

Correct AnswerverifiedShow Answer

Unsecured term loans typically involve very specific terms which may limit the owner's freedom to make financial decisions.

Correct AnswerverifiedShow Answer

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B

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C

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Asset-based lenders,which are usually sm...
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Commercial banks are the very heart of t...
View Answer

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True

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