Ch. 13

When assessing the creditworthiness of new entrepreneurs, lending institutions review the "Five C's". The ability of the entrepreneur to repay borrowed funds is known as:

• capacity

• capital

• collateral

• conditions

• character

When assessing the creditworthiness of new entrepreneurs, lending institutions review the "Five C's". The money the entrepreneur has invested in the business, which is an indication how much is at risk if the business should fail is known as:

• capacity

• capital

• collateral

• conditions

• character

When assessing the creditworthiness of new entrepreneurs, lending institutions review the "Five C's". The guarantees, or additional forms of security (such as assets), the entrepreneur can provide the lender is known as:

• capacity

• capital

• collateral

• conditions

• character

When assessing the creditworthiness of new entrepreneurs, lending institutions review the "Five C's". The focus on the intended purpose of the loan is known as:

• capacity

• capital

• collateral

• conditions

• character

When assessing the creditworthiness of new entrepreneurs, lending institutions review the "Five C's". The general impression the entrepreneur makes on the potential lender or investor is known as:

• capacity

• capital

• collateral

• conditions

• character

All of the following are common loan restrictions except?

• limits on total debt

• limits on total equity

• restrictions on dividends or other payments to owners and/or investors

• restrictions on additional capital expenditures

• performance standards on financial ratios

Unlike traditional commercial banks, venture banks typically provide debt to start-ups that have already received equity financing from professional venture capital firms. In return for providing additional debt financing, these venture banks receive in return all of the following except?

• interest payments

• repayment of principal

• implementation of loan restrictions

• tax breaks on the interest

• right to buy equity at a specific price

Bank debt is not a realistic source of financing for start-ups due to all of the following reasons except?

• a large portion of the assets are intangible and provide no collateral

• payables either don't yet exist or its history is inadequate

• the start-up's dependence on a small number of irreplaceable people is not a good match to demand deposits or other bank liabilities

• receivables collection track record is incomplete

• in the event of a default, it is now plausible for the bank to install a management team to help right the operations

  payables either don't yet exist or its history is inadequate

A provision that allows lenders to acquire equity at a specific price is known as a(n):

• factor

• warrant

• venture lease

• equity carve-out

Personal credit cards have proven to be a source of financing for start-up firms for all of the following reasons except?

• credit card debt is not based on the firm's ability to repay, but rather the individual card holder's ability to repay
  

• teaser rates afford initial low cost borrowing

• balance transfer at below-prime rates
  

• credit card debt can create problems if the firm doesn't generate cash flows to cover credit card payments once low introductory rates expire