Question 1

Commercial banks receive a portion of their returns from warrants in addition to the receipt of interest and the repayment of the principal that was lent.

Accepted Answer

Commercial banks typically receive their returns from interest on loans and the repayment of the principal. Warrants are not typically involved in their returns.

Question 2

Commercial loan officers have the expertise to project new venture's business successes,and thus are as willing to make funds available to entrepreneurs on the same basis as other businesses.

Accepted Answer

Commercial loan officers assess the creditworthiness of businesses based on financial history, collateral, and business plans, among other factors. New ventures often present higher risks due to lack of history, making officers less willing to lend on the same terms as established businesses.

Question 3

The SBA's role in its microloan credit program is to approve the loans and guarantee up to 85% of the loan value.

Accepted Answer

The SBA does not directly approve loans in its microloan program; instead, it provides funds to intermediary lenders who then administer the loans to eligible small businesses.

Question 4

Among start-ups,it is widely understood that bank debt (outside ofSmall Business Administration loans),is not a very realistic source of financing for ventures with less than two years operating results.

Accepted Answer

Bank debt is often considered too risky for start-ups without a strong operating history, and SBA loans are a more common option.

Question 5

Compensation received by commercial loan officers makes them more likely to finance early-stage ventures.

Accepted Answer

This statement is not necessarily true. Commercial loan officers may prioritize financing ventures that have a lower risk of default or that are more likely to generate a higher return on investment, regardless of their stage of development. Compensation may also depend on other factors such as meeting loan quotas or achieving certain performance metrics.

Question 6

Collateral plays an important role in determining the willingness to lend and the amount and terms of the loan,making it the most important factor in the lending process.

Accepted Answer

While collateral is an important factor in the lending process, it is not the most important factor. Lenders also consider the borrower's credit history, income, and debt-to-income ratio among other factors to determine their willingness to lend, as well as the amount and terms of the loan.

Question 7

The SBA's venture capital credit program works through Community Development Financial Institutions (CDFIs).

Accepted Answer

The SBA's venture capital program primarily operates through Small Business Investment Companies (SBICs), not Community Development Financial Institutions (CDFIs). CDFIs focus on providing financial services in low-income communities and to people who lack access to financing.

Question 8

By an act of Congress,the Small Business Administration (SBA)was created for the purpose of fostering the initiation and growth of small businesses.

Accepted Answer

This statement is true. The Small Business Administration was indeed created by an act of Congress for the purpose of helping small businesses.

Question 9

Microloans in the SBA credit program are intended for very small businesses with a maximum amount of $35,000 to be used for general purposes.

Accepted Answer

Microloans in the SBA credit program are indeed intended for very small businesses with a maximum amount of $35,000 to be used for general purposes.

Question 10

Despite the high risk and costs of using a facilitator or up-front fee solicitor 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.

Accepted Answer

The statement states that despite the high risks and costs, many start-ups still seek facilitators or up-front fee solicitors for funding due to the length of time it takes to raise new funds, indicating that the statement is true.

Question 11

The Small Business Administration was created by an Act of Congress in 2003.

Accepted Answer

The answer of The Small Business Administration was created by...

Question 12

Microloans in the SBA credit program are made by not-for-profit or government-affiliated Community Development Financial Institutions (CDFIs).

Accepted Answer

Microloans in the SBA credit program are made by not-for-profit or government-affiliated Community Development Financial Institutions (CDFIs).

Question 13

Because investors and commercial lenders both seek returns on the funds given to start-up firms,entrepreneurs can obtain financing as easily from either source.

Accepted Answer

While both investors and commercial lenders may provide financing for start-up firms, the criteria and terms of their financing may differ. Investors often seek equity in the company and may have a greater tolerance for risk, while commercial lenders typically require collateral and a proven track record of financial stability. As a result, the process and ease of obtaining financing may vary depending on the source.

Question 14

Warrants allow lenders to buy equity at a specified price.

Accepted Answer

Warrants are a financial instrument that gives the holder the right to buy equity at a specific price within a certain time frame. Lenders commonly use warrants as a form of additional compensation or as a way to reduce risk in the event of loan default.

Question 15

Unlike traditional commercial banks,venture banks typically provide debt to start-ups that have already received equity financing from professional venture capital firms.

Accepted Answer

Venture banks specialize in providing debt to start-ups that have already secured equity financing from professional venture capital firms, while traditional commercial banks may be less willing to provide funding to high-risk start-ups without a proven track record or established collateral.

Question 16

Warrants are a debt instrument frequently used by commercial banks when financing entrepreneurial ventures.

Accepted Answer

Warrants are actually a type of equity instrument, not a debt instrument. They give the holder the right to purchase a certain number of shares of the issuing company's stock at a set price for a certain period of time. They are often used in combination with other types of financing, such as debt or preferred stock, to provide additional compensation or incentive for investors or lenders.

Question 17

The returns to venture bank lenders are generated solely from interest payments made by borrowers plus the return of the loan principal.

Accepted Answer

Venture bank lenders, like other investors, can also generate returns through equity participation, fees, and other financial arrangements with the companies they invest in, not solely from interest payments and return of the loan principal.

Question 18

Because of loan restrictions,obtaining funding from commercial lenders is prohibitive for entrepreneurs.

Accepted Answer

Loan restrictions can make it difficult for entrepreneurs to obtain funding from commercial lenders.

Question 19

Credit cards issued to start-ups have proven to be an alternative source of start-up financing.

Accepted Answer

The answer of Credit cards issued to start-ups have proven...

Question 20

The 7(a)loan traditionally has been the SBA's primary loan program

Accepted Answer

The 7(a) loan has been the SBA's primary loan program for many years, providing assistance to small businesses in various industries.

Quiz 12: Other Financing Alternatives

Commercial banks receive a portion of their returns from warrants in addition to the receipt of interest and the repayment of the principal that was lent.

Commercial loan officers have the expertise to project new venture's business successes,and thus are as willing to make funds available to entrepreneurs on the same basis as other businesses.

The SBA's role in its microloan credit program is to approve the loans and guarantee up to 85% of the loan value.

Among start-ups,it is widely understood that bank debt (outside ofSmall Business Administration loans),is not a very realistic source of financing for ventures with less than two years operating results.

Compensation received by commercial loan officers makes them more likely to finance early-stage ventures.

Collateral plays an important role in determining the willingness to lend and the amount and terms of the loan,making it the most important factor in the lending process.

The SBA's venture capital credit program works through Community Development Financial Institutions (CDFIs).

By an act of Congress,the Small Business Administration (SBA)was created for the purpose of fostering the initiation and growth of small businesses.

Microloans in the SBA credit program are intended for very small businesses with a maximum amount of $35,000 to be used for general purposes.

Despite the high risk and costs of using a facilitator or up-front fee solicitor 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 Small Business Administration was created by an Act of Congress in 2003.

Microloans in the SBA credit program are made by not-for-profit or government-affiliated Community Development Financial Institutions (CDFIs).

Because investors and commercial lenders both seek returns on the funds given to start-up firms,entrepreneurs can obtain financing as easily from either source.

Warrants allow lenders to buy equity at a specified price.

Unlike traditional commercial banks,venture banks typically provide debt to start-ups that have already received equity financing from professional venture capital firms.

Warrants are a debt instrument frequently used by commercial banks when financing entrepreneurial ventures.

The returns to venture bank lenders are generated solely from interest payments made by borrowers plus the return of the loan principal.

Because of loan restrictions,obtaining funding from commercial lenders is prohibitive for entrepreneurs.

Credit cards issued to start-ups have proven to be an alternative source of start-up financing.

The 7(a)loan traditionally has been the SBA's primary loan program