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CHAPTER 13
OTHER FINANCING ALTERNATIVES
True–False Questions
to obtain financing, many start-ups never-the-less seek them as a source of
funds due to the length of time it takes to raise new funds.
the amount and terms of the loan, making it the most important factor in the
lending process.
business successes, and thus are as willing to make funds available to
entrepreneurs on the same basis as other businesses.
given to start-up firms, entrepreneurs can obtain financing as easily from either
source.
prohibitive for entrepreneurs.
to start-ups that have already received equity financing from professional
venture capital firms.
Business Administration loans), is not a very realistic source of financing for
ventures with less than two years operating results.
likely to finance early-stage ventures.
financing entrepreneurial ventures.
start-up financing.
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payments made by borrowers plus the return of the loan principal.
addition to the receipt of interest and the repayment of the principal that was
lent.
created for the purpose of fostering the initiation and growth of small
businesses.
2003.
businesses with a maximum amount of $35,000 to be used for general
purposes.
and guarantee up to 85% of the loan value.
government-affiliated Community Development Financial Institutions
(CDFIs).
Development Financial Institutions (CDFIs).
$5,000,000, require collateral, and can be used for most business purposes.
loan value.
company’s portion of the debt but does not guaranteed the debt of the
participating commercial bank.
value.
the receivables at a discount from the total amount due on the receivables.
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opportunity to take an equity interest in the venture.
issue.
their face value.
traditional venture capital firms.
opportunity for foreign nationals to obtain a “green card” through the EB–5
immigrant visas program.
investing $1 million in the U.S. that will preserve or create at least 100 jobs for
U.S. workers.
Multiple-Choice Questions
institutions review the “Five C’s”. The ability of the entrepreneur to repay
borrowed funds is known as:
a. capacity
b. capital
c. collateral
d. conditions
e. character
institutions review the “Five C’s”. The money the entrepreneur has invested in
the business, which is an indication how much is at risk if the business should
fail is known as:
a. capacity
b. capital
c. collateral
d. conditions
e. character
institutions review the “Five C’s”. The guarantees, or additional forms of
security (such as assets), the entrepreneur can provide the lender is known as:
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a. capacity
b. capital
c. collateral
d. conditions
e. character
institutions review the “Five C’s”. The focus on the intended purpose of the
loan is known as:
a. capacity
b. capital
c. collateral
d. conditions
e. character
institutions review the “Five C’s”. The general impression the entrepreneur
makes on the potential lender or investor is known as:
a. capacity
b. capital
c. collateral
d. conditions
e. character
a. limits on total debt
b. limits on total equity
c. restrictions on dividends or other payments to owners and/or
investors
d. restrictions on additional capital expenditures
e. performance standards on financial ratios
to start-ups that have already received equity financing from professional
venture capital firms. In return for providing additional debt financing, these
venture banks receive in return all of the following except?
a. interest payments
b. repayment of principal
c. implementation of loan restrictions
d. tax breaks on the interest
e. right to buy equity at a specific price
following reasons except?
a. a large portion of the assets are intangible and provide no collateral
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b. payables either don’t yet exist or its history is inadequate
c. the start-up’s dependence on a small number of irreplaceable people
is not a good match to demand deposits or other bank liabilities
d. receivables collection track record is incomplete
e. in the event of a default, it is now plausible for the bank to install a
management team to help right the operations
known as a(n):
a. factor
b. warrant
c. venture lease
d. equity carve-out
firms for all of the following reasons except?
a. credit card debt is not based on the firm’s ability to repay, but rather
the individual card holder’s ability to repay
b. teaser rates afford initial low cost borrowing
c. balance transfer at below-prime rates
d. credit card debt can create problems if the firm doesn’t generate
cash flows to cover credit card payments once low introductory rates
expire
a. Standard Business Arrangement
b. Small Business Association
c. Small Business Administration
a. 12. By an act of Congress, the Small Business Administration (SBA) was
created in which one of the following years?
a. 1953
b. 1968
c. 1973
d. 1985
e. 1993
a. provide capital and credit to entrepreneurial start-ups
b. guaranteeing general business loans
c. provide equity financing for start-ups
d. help create new jobs in small businesses
e. help small firms obtain Federal contracts
e. 14. Which of the following is not a Small Business Administration program?
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a. loan guaranty programs
b. certified and preferred lender programs
c. low documentation loan programs
d. energy and conservation loan programs
e. certified financial planner funding programs
a. accounts payable
b. vendor financing
c. factoring
d. trade notes
e. leasing
a. interest received
b. principal repayments
c. warrants being exercised
d. all of the above
e. none of the above
Administration (SBA) credit program?
a. 7(a) loan
b. 504 loan
c. microloan
d. venture capital loan
e. credit card loan
guarantee a not-for-profit Certified Development Company’s portion of the
debt?
a. 7(a) loan
b. 504 loan
c. microloan
d. venture capital loan
e. credit card loan
and guarantees up to 85% of loan value?
a. 7(a) loan
b. 504 loan
c. microloan
d. venture capital loan
e. credit card loan
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of providing a direct loan to a community organization, which reloans the
funds in small amounts?
a. 7(a) loan
b. 504 loan
c. microloan
d. venture capital loan
e. credit card loan
be lent Small Business Investment Companies (SBICs) and guarantees
payment to investors?
a. 7(a) loan
b. 504 loan
c. microloan
d. venture capital loan
e. credit card loan
lenders in which of the following SBA credit programs?
a. 7(a) loan
b. 504 loan
c. microloan
d. venture capital loan
e. credit card loan
Companies, are lenders in which of the following SBA credit programs?
a. 7(a) loan
b. 504 loan
c. microloan
d. venture capital loan
e. credit card loan
c. 24. Not-for-profit or government-affiliated Community Development
Financial Institutions (CDFIs) are lenders in which of the following SBA
credit programs?
a. 7(a) loan
b. 504 loan
c. microloan
d. venture capital loan
e. credit card loan
the following SBA credit programs?
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a. 7(a) loan
b. 504 loan
c. microloan
d. venture capital loan
e. credit card loan
a. factors prefer business over consumer accounts
b. factoring is done at a discount to the third party purchaser
c. factoring discounts are often a function of the riskiness of the
receivables
d. factoring speeds the inflow of cash to the seller of the receivables
e. receivable lending is the process of factoring
a. capital leasing
b. warehouse financing
c. receivables lending
d. a microloan
e. venture leasing
referred to as:
a. factoring
b. receivables lending
c. venture banking
d. vendor financing
e. mortgage lending
a. factoring
b. capital lease
c. venture lease
d. mortgage lease
e. both a and d
lessor is known as:
a. venture leasing
b. capital leasing
c. investment leasing
d. none of the above