SBM I Test 3
Card Set Information
SBM I Test 3
SBM I Test 3
3 Sources of funding from within your business?
Suppliers - Trade credit
3 general sources of equity funds available to corporation
7 (m) Microloan Program
the SBA's primary bsiness loan program to help qualified small businesses obtain financing
adantages of internal sources of funding
1. low cost, may save money
2. careful mgmt makes external sources more available
3. low risk
4. maximum flexibility
5. you retain control
asset based loan
a line of credit secured by working capital assets
a loan for which items of inventory or other movable property serve as collateral
the difference between current assets and current liabilities
all assets that can be readily converted into cash.
the current asset items consisting of cash, inventories, and A/R.
issued by banks and other lending institutions for short periods, generally thirty to ninety days, but given up to six months
these notes are usually repaid in one lump sum on the maturity date.
often there is no collateral on these loans, although some may be required, depending on the borrower's credit standing.
a compensating balance may also be required.
this means that some portion of the loan must remain in one of the business's accounts at the bank.
represents ownership in the corporation.
a legal form of organization whereby legal entity is authorized by a state to operate a business under the entity's charter or articles of incorporation.
debt is classified by the length of time that you have to pay it back.
capital invested by owner(s)
those that are generated by the invested capital of a firm
examples of circulating capital
cash, inventories, A/R
examples of fixed capital
buildings, land/property, machinery, furniture, etc.
examples of intermediate debt
vehicles, fixtures, etc.
examples of short-term debt
commercial notes, A/R financing, factoring, inventory loans, line of credit, etc.
obtaining cash before payments are received from customers by selling off one's acounts receivable to a third party
another type of accounts receivble.
long-term capital that is invested in the small business
funds invested in long-term assets
assets that will be retained for a very long time
initial public offering
the issuance of stock that is to be traded in public financial markets
interal sources of funding
profits, customers, suppliers-trade credit
externnal sources of funding
equity, debt financing, banks
line of credit
an understanding between a bank and the business indicating the maximum amount the bank is willing to loan the borrower
long term debt
debt with a maturity date beyond five years
a loan secured by a mortgage on property
needs for business financing
1. to start a new business
2. the establishment & maintaining working capital
3. seasonal peaks
5. physical expansion
a form of legal organization in which a business association made up of two or more persons is formed for the purpose of carryinng on as co-owners
a legal form of organization whereby the business is owned and operated by one person
unsecured term loan
issued to a company that can prove it has financial strength & profitability to repay the loan
owners contribute 40-50% of the required equity