133) CAPs are designed to encourage lending institutions to make loans to businesses that do not
qualify for traditional financing.
Topic: State and Local Development Programs
AACSB: Analytic Skills
134) Typically, factoring is less expensive than bank and commercial finance company loans.
Topic: Factoring Accounts Receivable
AACSB: Analytic Skills
135) One advantage of leasing is that in most cases, it does not require any down payment.
Topic: Leasing
AACSB: Analytic Skills
136) Under a CAP, the bank and the borrower each pay an upfront fee (a portion of the loan
amount) into a loan-loss reserve fund at the participating bank, and the state matches this
amount.
Topic: State and Local Development Programs
AACSB: Analytic Skills
137) The average microloan is for $25,500 with a maturity of 37 months (the maximum term is
six years).
Topic: Microloan Programs
AACSB: Analytic Skills
138) Approximately one-half of all SBA loan guarantees are for machinery and equipment or
working capital.
Topic: The CAPLine Program
AACSB: Analytic Skills
139) Most SBIC loans are between $10,000 and $50,000 and the loan term is longer than most
banks allow.
Topic: Small Business Investment Companies (SBICs)
AACSB: Analytic Skills
27
140) Under what circumstances should the small business owner consider borrowing money?
Topic: Introduction
AACSB: Analytic Skills
141) Explain the role of commercial banks as source of debt capital for small businesses. What
types of financing are available from commercial banks?
Topic: Commercial Banks
AACSB: Analytic Skills
142) What is an asset-based lender? What are the most common types of asset-based financing?
Topic: Asset-Based Financing
AACSB: Analytic Skills
28
143) What is trade credit? How is it different from or the same as loans from equipment
suppliers?
Topic: Trade Credit
AACSB: Analytic Skills
144) What role do commercial finance companies, stockbrokerages, and insurance companies
play in providing debt-based loans to small businesses?
Topic: Commercial Finance Companies, Stockbrokerage, and Insurance Companies
AACSB: Analytic Skills
29
145) What is an SBIC? How important is it as a source of small business capital? How does it
operate?
Topic: Small Business Investment Companies (SBICs)
AACSB: Analytic Skills
146) How do the EDA and HUD lend money to small businesses?
Topic: EDA and HUD
AACSB: Analytic Skills
30
147) What are local development companies and the small business innovation research
programs? How do they help small businesses?
Topic: Small Business Innovation Research (SBIR) Program
AACSB: Analytic Skills
148) Explain the different SBA loan programs. Explain how a typical SBA loan guarantee works.
What interest rates do such loans normally carry?
Topic: Small Business Administration (SBA)
AACSB: Analytic Skills
31
149) Explain how a small business can use factoring to raise funds. What are the advantages and
dangers of this type of financing?
Topic: Other Methods of Financing
AACSB: Analytic Skills
32