80) The ________ provides loans to entrepreneurs in economically challenged communities and
viewed as high-risk borrowers.
A) Certified Development Company Program
B) Patriot Express Program
C) Community Express Program
D) 7(A) Loan Guarantee Program
81) The maximum loan under the SBA’s Community Express Program is ________ with an SBA
guarantee of up to ________ percent with a streamlined application process .
A) $250,000; 35
B) $250,000; 75
C) $250,000; 85
D) $500,000; 85
82) In the ________ program, participating lenders use their own loan procedure and
applications to make loans of up to $350,000 to small businesses and the SBA guarantees 50
percent of the loan. .
A) loan guarantee
B) SBA loan
C) Community Advantage Loan
D) SBAExpress
83) 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.
A) veterans and their spouses or widows
B) women
C) minorties
D) corporate cast-offs
84) ________ were created by the SBA to provide loans under $100,000 that are normally
shunned by banks.
A) Microloans
B) Preferred loans
C) Seasonal lines of credit
D) Disaster loans
85) For small businesses going global, the SBA offers this program with a one-page loan
application and a response time normally within 10 days.
A) Export Working Capital (EWC) Program
B) International Capital Expansion (ICE) Program
C) International Trade Program
D) CAPLine Program
86) 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. :
A) 7(A) Loan Guarantee Program.
B) Section 504 Certified Development Company Program.
C) Community Advantage Loan Program
D) Microloan Program.
87) Small businesses devastated by floods, earthquakes, fires, and other maladies would seek
assistance through which SBA loan program?
A) Calamity
B) Catastrophic
C) Disaster
D) SBIR
88) Disaster loans carry below-market interest rates and terms as long as ________ years
A) 10
B) 30
C) 40
D) 50
89) A program offered by communities that combine private and public funds to make loans to
small businesses, often at favorable interest rates, is the:
A) CommunityExpress Program.
B) CAPLine Program.
C) Capital Access Program.
D) revolving loan fund.
90) Factors typically discount ________ percent of the face value of a company’s accounts
receivable.
A) 5 – 40
B) 10 – 20
C) 60 – 95
D) 95 – 100
91) Selling the small company’s accounts receivable outright to another business is called:
A) collateral.
B) factoring.
C) trade credit.
D) a line of credit.
92) Factoring:
A) is a more expensive method of financing than borrowing from a bank.
B) places the risk of uncollected accounts receivable on the small business owner.
C) is best used as a long-term source of capital.
D) is a type of trade credit.
93) A small business that uses factoring:
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.
94) One of the easiest and most common methods of debt capital available is:
A) bootstrap financing.
B) leasing.
C) credit cards.
D) revolving loan fund .
95) Entrepreneurs have access to two different types of capital, ________ and ________ .
A) debt; equity
B) debt; retained
C) debt; leveraged
D) layered; equity
96) Equity capital represents the personal investment of the owner (or owners) in a business and
is sometimes called ________ because of the potential outcome.
A) debt capital
B) opportunity capital
C) risk capital
D) layered financing
97) Rather than piecing together their startup capital from multiple sources as they have in the
past, entrepreneurs now are relying on a single source of funding.
98) In startup companies, raising capital can easily consume as much as one-half of the
entrepreneur’s time and take many months to complete.
99) 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.
100) Most entrepreneurs seeking money to launch their businesses need more than $1,000,000 in
startup capital.
101) 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.
102) Capital is any form of wealth employed to produce more wealth.
103) A small company needs fixed capital to purchase its permanent assets.
104) A company that is experiencing rapid expansion has similar capital requirements as those of
a fledgling business.
105) While equity capital represents the personal investment of the owner(s) of a business and
does not have to be repaid, debt capital is a liability that must be repaid with interest in the
future.
106) Equity capital is also called risk capital because these investors assume the primary risk of
losing their funds if the business fails.
107) Entrepreneurs are most likely to give up more equity in their businesses in the startup phase
than in any other.
108) Unlike equity financing, debt financing does not require an entrepreneur to dilute her
ownership interest in the company.
109) Bootstrapping is a process in which entrepreneurs tap their personal savings and use
creative, low-cost start-up methods to launch their businesses.
110) Bootstrap financing describes using internal, and often creative, methods of financing a
company’s need for capital.
111) Bootstrapping 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.
112) After an entrepreneur invests his own money for startup, he or she will typically seek
additional financing from friends and family next.
113) 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.
114) Crowd funding is a process in which entrepreneurs tap their personal savings and use
creative, low-cost start-up methods to launch their businesses.
115) 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.
116) If an entrepreneur needs a relatively small amount of money to launch a company, angels
are a primary source of funds.
117) Angels are not a good source of financing for entrepreneurs seeking relatively small
amounts of money, as they typically do not make investments of less than $1 million.
118) Private investors, or angels, seek 60 to 75 percent annual return on investment, which is
much higher than those of professional venture capitalists, and tend to take a 51 percent + share
of the business.
119) Angels fill a significant gap in the seed capital market.
120) One of the disadvantages of angels is that they are typically not willing to wait more than
three years to cash out their investments.
121) 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.
122) An option for acquiring equity capital is for the entrepreneur to take on partner(s); however,
it is important that he consider the impact of giving up some personal control over operations and
of sharing profits with others.
123) 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.
124) A typical venture capital firm seeks investments in the $20,000 to $50,000 range and annual
returns of 35-50 percent over three to five years.
125) Venture capital companies reject 90 percent of the proposals they receive because they don’t
meet the firms’ investment criteria.
126) Venture capital firms rarely take an active role in managing the business in which they
invest.
127) Venture capital companies invest only in companies in the startup phase.
128) The most important ingredient that venture capitalists look for in judging the potential
success of a small business is a competent management team.
129) Two factors that make a deal attractive to venture capitalists include high returns and a
convenient and profitable exit strategy.
130) Corporate Venture Capital accounts for approximately 14 percent of all venture capital.
131) In an initial public offering, a company raises capital by selling shares of its stock to the
general public for the first time.
132) A public stock sale is an effective method of raising large amounts of capital, but it can be
an expensive and time-consuming process filled with regulatory nightmares.
133) Few companies with less than $25 million in annual sales manage to go public successfully.
134) Only about half of the companies that attempt a public stock offering ever complete the
process.
135) It is extremely difficult for a startup company with no track record of success to raise
money with a public stock offering.
136) Publicly held companies must file periodic reports with the Securities and Exchange
Commission.
137) Since their stock offerings are small, most entrepreneurs are able to take their companies
public without the assistance of accountants, attorneys, and underwriters.
138) The single most important ingredient in making a successful initial public offering is
selecting a capable underwriter to manage the process.
139) The typical letter of intent states that the underwriter of a stock issue is not bound to the
offering until it is executed, usually the day before or the day of the offering.
140) A company involved in an initial public offering may sell its shares of stock before the
effective date of the offering as long as the investors are accredited.
141) Not only must a company meet SEC requirements for a public offering, but it also must
meet securities laws in all states in which the issue is sold.
142) The purpose of the road show, coordinated by the underwriter of an initial public offering
(IPO), is to promote interest in the IPO among potential syndicate members.
143) The goal of regulation S-B and S-K’s simplified registration process is to make it easier for
small companies to go public by cutting the paperwork and the costs of raising capital.
144) 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.
145) In a Rule 147 (intrastate) offering, a company may only sell its shares to investors in the
state in which it is incorporated and does business.
146) Regulation D Rule 504 (SCOR) offerings has a $1 million ceiling on the amount raised in
any 12-month period.
147) Because small businesses typically borrow small amounts of money, they pay interest rates
below the “prime rate.”
148) Commercial banks are lenders of last resort for small businesses.
149) Bank loans, retained earnings and credit cards are the most popular sources of small
business financing.
150) Banks tend to be very conservative in their lending practices and prefer to make loans to
established small businesses rather than to high-risk business start-ups.
151) Banks prefer to make loans to business start-ups because although the risk level is higher,
the potential returns are also much higher.
152) A line of credit is a form of financing employed by sellers of big-ticket items such as cars,
boats, and furniture, which the retailers pledge as collateral against the loan.
153) A boat retailer would most likely use a line of credit to finance the purchase of her
inventory.
154) Commercial banks are primarily lenders of short-term capital to small businesses, although
they will make certain intermediate and long-term loans, normally requiring the loan to be
secured by collateral.
155) A business owner does not pay interest on a floor-planned item in inventory until it is sold.
156) Asset-based borrowing enables a small company to borrow money by pledging otherwise
idle assets such as accounts receivable and inventory.
157) The most common form of secured credit is accounts receivable financing in which
businesses can usually borrow an amount equal to 55-80 percent of its receivables.
158) Asset-based loans are an expensive method of financing because of the cost of originating
and maintaining them and the higher risk involved.