Chapter 12 Quiz

Restrictions that limit or require certain activities as conditions of a loan are called?

Convenants

_____ is an arrangement with a loaning entity that purchases a business' accounts receivable and advances the business a percentage.

Factoring

A _____ is an informal agreement between a borrower and a bank concerning the maximum amount of funds the lender will provide at any given time.

Line of Credit

The best description of the current (as of early 2015) state of equity-based crowdfunding is:

Only accredited investors can make actual equity investments

During early-stages of a business, equity financing is preferred to debt because:

Outside investors like to see a founder put "skin in the game" Paying interest on debt is generally unaffordable for a new business

A/n ____ must have an income of at least $200,000 or a net worth of at least $1 million, not including the primary residence.

Accredited investor

The best description of the difference between angel investors and venture capitalists is?

Angels invest their own money in early-stage businesses; Venture capitalists invest other peoples money in a later-stage businesses

Which of the following statements is most accurate concerning financing for businesses? A. Equity financing should be avoided by entrepreneurs at all costs. B. A great idea is the only thing necessary to get funding. C. Businesses that have an established track record are more likely to receive financing from banks and other financial institutions. D. New businesses find it easy to get financing because investors who get in one the ground always make more money.

C. Businesses that have an established track record are more likely to receive financing from banks and other financial institutions.