Topic 5 Quick Check: Funding with Debt
Which of the following statements is true about debt financing? Debt financing will never requires collateral With debt financing you make regular payments with interest You sell major portions of your business It is almost impossible to start a new business without debt financing
With debt financing you make regular payments with interest
What is the major advantage of funding with debt? You maintain full ownership of your company You don't have to pay back the loan if your company fails You can often get low-interest rates without any collateral You give up ownership but you obtain excellent partners
You maintain full ownership of your company
What will the loan officer examine when you apply for secure debt financing through a bank? Your capacity to pay back the loan you will receive Any collateral you can pledge to secure the loan Your character, education, training, and experience in the industry All of the above
All of the above
When is using credit cards a reasonable strategy for a business? When you need help with cash flow management When you can acquire assets that can produce immediate sales When you can pay the card off in 30 days so that you don't incur interest All of the above
All of the above
What are lenders looking for when they assess your character? They want to know that you have adequate experience, education, training, and expertise to grow your business They want to know that you are honest, trustworthy, law-abiding, and hardworking They want to know that you are passionate about your business and committed to making it succeed All of the above are important to lenders when assessing your character
All of the above are important to lenders when assessing your character
How did Jeff Wester finance his blacksmith shop? A gentleman named Joe Fought gave him flexible loans on promissory notes He found used equipment at auctions from companies that were going out of business He created a horseshoeing business to produce his early cash flow All of the above helped Jeff fund his blacksmith shop
All of the above helped Jeff fund his blacksmith shop
How did Jon Huntsman fund his new business in the petrochemical industry? He contributed $500,000 of his own money He convinced Shell Oil to give him a $12 million promissory note that he would pay off in 10 years He convinced ARCO to lend him $10 million with a commitment to buy their raw material for 13 years All of the above helped Jon fund his new business
All of the above helped Jon fund his new business
What are the 5 Cs for securing loans? Common values, collateral, capital, conditions, character Capacity, collateral, capital, conditions, character Corporate experience, capacity, collateral, capital, character None of the above
Capacity, collateral, capital, conditions, character
Which of the following are sources of debt financing? Credit cards, trade credit, banks, and credit unions Angel investors, private equity firms, and venture capitalists Savings, 401Ks, and personal assets Private equity firms, personal assets, and credit unions
Credit cards, trade credit, banks, and credit unions
Which of the following is very crucial for debt financing? Having a great business idea you are considering Having a college degree from a reputable university Having sufficient cash flow to make the regular required payments None of the above
Having sufficient cash flow to make the regular required payments