Exam 12: A Firms Sources of Financing

The private sale of a firm's common stock is regulated by the Securities and Exchange Commission.

LIBOR is _____ the prime rate.

Match the term with its definition. a.Balloon payment b.Business angels c.Chattel mortgage d.Crowdfunding e.Factoring f.Initial public offering g.Loan covenants h.Private placement i.Real estate mortgage j.Venture capitalist -A long-term loan with real property held as collateral

What should an entrepreneur do before approaching an investor?

Match the term with its definition. a.Asset-based loan b.Basis point c.Chattel mortgage d.Equipment loan e.LIBOR (London InterBank Offered Rate) f.Line of credit g.Prime rate h.Purchase-order financing i.Term loan -Money loaned for a 5-to 10-year term,corresponding to the length of time the investment will bring in profits

For every firm,there is a "right" answer to the question of balancing debt and equity,and it is important that the small business owner find that balance.

Elena plans to open a non-profit child-care center in her depressed neighborhood.She may qualify for an SBA loan program that provides loans of up to $50,000 known as the:

Which financing source has the greatest advantage of speed?

Borrowing money rather than issuing common stock typically increases the potential for higher rates of return to owners.

Match the definition with its term. a.7(a)Loan Guaranty Program b.7(m)Microloan Program c.Certified Development Company (CDC)Loan Program d.Community-based financial institution e.Formal venture capitalists f.Informal venture capital g.Loan covenants h.Small Business Innovative Research (SBIR)Program i.Small business investment companies (SBICs) -Privately owned banks,regulated by the SBA,that provide long-term loans and/or equity capital to small businesses

Allie is starting a purse business and has been approached by Renee,a business angel,about investing in the company.Discuss items Allie should consider before going into business with Renee.

The type of financing Evangeline received from a business angel is known as:

The age of a company has little impact on the types of financing available to it.

Companies that have business dealings with a new firm are possible sources of funds for financing inventory and equipment.

A balloon payment

Match the term with its definition. a.Asset-based loan b.Basis point c.Chattel mortgage d.Equipment loan e.LIBOR (London InterBank Offered Rate) f.Line of credit g.Prime rate h.Purchase-order financing i.Term loan -The interest rate chareged by commercial banks on loans to their most creditworthy customers

Asset-based lending is a type of financing secured by assets such as equipment and inventory.

Match the definition with its term. a.7(a)Loan Guaranty Program b.7(m)Microloan Program c.Certified Development Company (CDC)Loan Program d.Community-based financial institution e.Formal venture capitalists f.Informal venture capital g.Loan covenants h.Small Business Innovative Research (SBIR)Program i.Small business investment companies (SBICs) -Funds provided by wealthy private individuals to high-risk ventures

Match the definition with its term. a.7(a)Loan Guaranty Program b.7(m)Microloan Program c.Certified Development Company (CDC)Loan Program d.Community-based financial institution e.Formal venture capitalists f.Informal venture capital g.Loan covenants h.Small Business Innovative Research (SBIR)Program i.Small business investment companies (SBICs) -Individuals who form limited partnerships for the purpose of raising venture capital from large institutional investors

Marla runs a not-for-profit daycare center in her home located in a rural area.She is in need of $10,000 to purchase inventory,supplies and equipment.What Small Business Administration program would be the best fit for Marla's situation and why?