Question 1

The entrepreneur's "character" (even though it is an intangible factor)and the quality of the presentation are important factors in evaluating a loan proposal.

Accepted Answer

The entrepreneur's character and the quality of the presentation are important factors in evaluating a loan proposal.

Question 2

The most common reasons banks give for rejecting small business loan applications are undercapitalization and too much debt.

Accepted Answer

Undercapitalization and too much debt are two of the most common reasons banks give for rejecting small business loan applications. Other reasons may include poor credit history, insufficient collateral, and lack of a solid business plan.

Question 3

The "C" of the 5 C's of Credit that is synonymous with cash flow is capital.

Accepted Answer

The "C" synonymous with cash flow is actually character. Capital refers to the assets a person or company has available for use.

Question 4

The higher a small business scores on the 5 C's of credit,the greater its chances will be of receiving a loan.

Accepted Answer

The 5 C's of credit (character, capacity, capital, collateral, conditions) are used by lenders to evaluate a borrower's creditworthiness. A small business that scores well on these factors is seen as less risky and therefore has a greater chance of being approved for a loan.

Question 5

The loan proposal portion of the business plan should include a realistic timetable for repayment or for investors to exit.

Accepted Answer

The loan proposal should include a realistic timetable for repayment or for investors to exit. This is important information for lenders or investors to know before committing to funding the business.

Question 6

The majority of loans banks make to small business startups are unsecured loans.

Accepted Answer

Banks typically require collateral, such as personal assets or property, when making loans to small business startups. This reduces their risk and provides security in case the borrower is unable to repay the loan. Unsecured loans may be available, but they generally have higher interest rates and stricter eligibility requirements.

Question 7

Entrepreneurs should artificially inflate the amount of a loan request and expect the loan officer to "talk them down."

Accepted Answer

Entrepreneurs should not artificially inflate the amount of a loan request as it is unethical and may be considered fraud. Instead, they should provide a realistic and justifiable loan amount and be willing to explain their business plan and financial needs to the loan officer.

Question 8

The most common reason banks give for rejecting small business loan applications is the entrepreneur's poor credit history.

Accepted Answer

The answer of The most common reason banks give for...

Question 9

The entrepreneur's request for funds in the business plan should be specific and detailed.

Accepted Answer

The entrepreneur should clearly state the amount of funds needed, what they will be used for, and how they will be repaid. Vague or general requests may not be taken seriously by potential investors or lenders.

Question 10

To make a business plan more attractive,an entrepreneur should include a potential exit strategy as a way to "cash out" for investors.

Accepted Answer

Including a potential exit strategy in a business plan can make it more attractive for investors as it gives them a way to cash out on their investment in the future. Common exit strategies include selling the business, going public with an IPO, or a management buyout.

Question 11

Most loans banks make to startup businesses are secured not by collateral but by the character of the entrepreneur.

Accepted Answer

Most loans banks make to startup businesses are secured by collateral, such as property, equipment, or inventory. However, the character and creditworthiness of the entrepreneur are also considered in the loan decision.

Question 12

A lender's primary concern in granting a loan is reassurance that the applicant will repay it,whereas an investor's primary concern is earning a satisfactory rate of return.

Accepted Answer

A lender's primary concern is to ensure that the loan will be repaid, while an investor's primary concern is to earn a satisfactory rate of return on their investment.

Question 13

After presenting her business plan to a group of potential lenders and investors,an entrepreneur should sit back and wait to hear from those who might be interested in the venture.

Accepted Answer

After presenting the business plan, an entrepreneur should follow up with potential lenders and investors and be proactive in seeking feedback and interest in the venture. Simply waiting to hear back may result in missed opportunities or lack of follow-up.

Question 14

When presenting a business plan to a group of potential lenders and investors,an entrepreneur should cover every detail in the plan,striving to answer every question his audience might have.

Accepted Answer

The answer of When presenting a business plan to a...

Question 15

Explain at least two functions or purposes of preparing a business plan.

Accepted Answer

The answer of Explain at least two functions or purposes...

Question 16

Potential lenders and investors expect entrepreneurs to exaggerate the truth in their business plans,so telling the truth in the plan is really not important.

Accepted Answer

This statement is false. While it may be tempting for entrepreneurs to exaggerate the truth in their business plans to impress potential lenders and investors, honesty and accuracy are crucial in building trust and a solid foundation for a successful business. Additionally, lenders and investors will likely do their own due diligence and uncover any inconsistencies or falsehoods in the plan, potentially leading to a negative impact on the entrepreneur's reputation and ability to secure funding.

Question 17

What are some of the most important questions a feasibility analysis answers and what model may be of value in this process?

Accepted Answer

The answer of What are some of the most important...

Question 18

Cash flow projections are not an essential part of a business plan as long as the entrepreneur provides accurate forecasts of the venture's profits.

Accepted Answer

Cash flow projections are an essential element of a business plan as they provide insight into the availability and timing of cash inflows and outflows. Accurate profit forecasts alone do not provide this level of detail and may not fully reflect the financial health of the venture.

Question 19

The quality of the entrepreneur's business plan determines the first impression potential lenders and investors have of the company.

Accepted Answer

A well-prepared and realistic business plan can present the entrepreneur as knowledgeable and serious about their business idea, which can increase the likelihood of securing funding from lenders and investors. On the other hand, a poorly written or unrealistic business plan can project the entrepreneur as unprepared and inexperienced, decreasing the likelihood of obtaining funding.

Question 20

Spelling and grammatical errors in a business plan don't really matter; potential lenders and investors look past them at the content of the plan.

Accepted Answer

Spelling and grammatical errors can significantly impact the credibility and professionalism of a business plan. Lenders and investors are likely to view such errors as a lack of attention to detail and may question the quality of the overall plan. It's important to thoroughly proofread and edit a business plan before submitting it to potential investors or lenders.

Quiz 4: Conducting a Feasibility Analysis and Crafting a Winning Business Plan