Ch 12 financing source

Question 1

line of credit

Answer 1

amount bank is willing to lend to a borrower

Question 2

term loan

Answer 2

money loaned for a 5 or 10 year term, usually correspond with the time the investment will bring profits

Question 3

chattel mortgage

Answer 3

a loan for which items of inventory or other movable property serve as collateral

Question 4

real estate mortgage

Answer 4

a long term loan with real property held as collateral

Question 5

Prime rate (aka Base Rate)

Answer 5

interest rates by banks to their most creditworthy customers

Question 6

LIBOR (London InterBank Offered Rate)

Answer 6

The interest rate charge by London banks to other london banks

Question 7

Basis Point

Answer 7

1/100th of 1% when quoting an interest rate

Question 8

balloon payment

Answer 8

a large payment required about halfway through the term, repaying the loan balance in full

Question 9

loan covenants

Answer 9

bank imposed restrictions on a borrower that enhance the chance of timely repayment

Question 10

equipment loan

Answer 10

an installment loan from a seller of machinery used by a business

Question 11

asset based loan

Answer 11

a line of credit secured by working capital assets

Question 12

factoring

Answer 12

obtaining cash by selling accounts receivable to another firm

Question 13

purchase order financing

Answer 13

lender advances the amount of the borrowers cost of goods sold for a specific customer order less a fee

Question 14

business angels

Answer 14

private individuals who invest in others entrepreneurial ventures

Question 15

informal venture capital

Answer 15

funds provided by wealthy private individuals to high-risk ventures

Question 16

former venture capitals

Answer 16

individuals who form limited partnerships for the purpose of raising venture capital from large institutional investors

Question 17

7(a) loan guaranty program

Answer 17

loan program that helps small companies obtain financing through a guaranty provided by the SBA

Question 18

CDC- Certified Development Company 504 Loan Program

Answer 18

SBA loan program that provides long term loan financing for small businesses to acquire real estate, machinery, or equipment

Question 19

7(m) microloan program

Answer 19

SBA loan program that provides short term loans up to $50K to small businesses, not for profit child care care centers

Question 20

small business investment companies (SBIC)

Answer 20

privately owned banks, regulated by SBA, provide long term loans/equity capital, to small businesses

Question 21

small business innovative research SBIR program

Answer 21

sba program, helps finance companies, that plan to transform research into marketable products

Question 22

private placement

Answer 22

sale of a firms capital stock to select individuals

Question 23

initial public offering IPO

Answer 23

the issuance of stock to be traded in public financial markets

Question 24

crowdfunding

Answer 24

process of raising very small investments from a large number of investors via Internet