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GB 370- Test #2 Questions

Terms in this set (169)

What is the #1 form of financing used by most business start-ups?
self-financing
What is the downside of self-financing?
if market fails, you recieve a call from your broker, requesting you to supply more collateral; if you can't do that you'll be asked to sell some of your securites to shore up the collateral
What is one of most expensive ways to finance yourself?
credit cards
the larger your own investment ____
the easier it will be for you to aquire capitol from other sources
after self-financing, the 2nd most popular source for start-up money is composed of?
friends, relatives, and business associates
2 basic ways to finance a business?
equity and debt financing
In ____, you recieve capital in exchange for part ownership of the company.
equity financing
In ___, you recieve capital in the form of a loan, which must be paid back.
debt financing
Equity financing can come from ____ and ____.
venture capitol firms and private investors
____ is one of the more popular forms of equity financing used to finance, high risk, high return business
venture capitol
____ invest in businesses of every kind.
venture capitolists
Individual venture capitalists are also known as?
angels
Individual venture capitalists prefer to invest in ___?
industries that are familiar to them
___ is most likely to be given to an established company with an already proven track record.
venture capitol
One source of private capitol?
investment angel
___ refers to anyone who invests their $ in an entreprenuership company. Most are not ___.
angel, millionares
Angels can be classified into what 2 groups?
affiliated and non-affiliated
An affiliated angel is someone who___.
has some sort of contact with you or your business but not necessarily related or acquainted to you
An unaffiliated angel is someone who___.
has no connection to you or your business
People who might fit the cateogory of affiliated angel?
Professionals; business associates-supplers/vendors, customers, employees; competitors
People who might fit the cateogory of unaffiliated angel?
Professionals, middle managers, entreprenuers
Angels tend to find most of their investment opportunities through ____.
friends and business associates
Angels look for many of the same things professional venture capitalists look for:
strong managment, proprietary strength, window of opportunity, market potential, return of investment
___ simply means recieving $ in the form of a loan that you will have to repay.
debt financing
The most useful type of loan for small businesses is _____. It protects businesses from ____ and ____.
a line of credit. protects businesses from emergencies and stalled cash flow
Line of credits are intended for ___?
inventory purchases and operating costs covering working capitol and business cycle
A ____ is a short-term loan that extends the cash available in your businesses checking account to the upper limit of the loan contract.
line of credit
Line of credit loans usually carry ____ a bank offers since they are seen as ____. They are written for periods of ____ years and may be renewed for ____ for ____ fee.
-the lowest interest rate, fairly low risk.
-one year and can be renewed automatically for an annual fee
____ are paid back with equal monthly payments covering both ____ and ____. They may be written to ____.
installment loans, principal and interest. written to meet all types of business needs
Usually written under another name, you can identify them by the fact that full amount is recieved when the contract is signed, but only the interest is paid off during the life of the loan with a ____ payment of the principle due on the final day.
balloon loans, balloon
___ are usually reserved for situations when a business has to wait until a specific date before recieving payment from a client for its products or services
balloon loans
____ are used to make periodic payments to the contractors building new facilities when a mortage on the building will be used to pay off the loan. Bankers are concerned with who will be paying off the loan and whether that commitment is reliable.
interim loans
Loans can come in one or two forms:
secured or unsecured
____ has no collateral pledged as a secondary payment source should you default on the loan. The lender provides you with this because it considers ____. Highly unlikely for a new business.
unsecured loan, low risk
____ requires some kind of collateral but generally has lower interest rates than an unseccured loan.
secured loan
Typically used in international trade, this document allows entreprenuers to guarantee payment to suppliers in other countries.
letter of credit
It is easier to get start-up loans from ____.
community banks
What is the advantage of approaching commercial finance companies?
They may be more willing to look beyond its assets, they give opportunites to start ups and a lot of other business banks will not lend to
Experts advise using ____ financing as a last resort because ____.
credit card, interest rates are higher than any other type of financing
Lenders typically base their decisions on 4 criteria, often called ____.
"4 C's of credit": credit, character, capacity, collateral
____ usually carry the lowest interest rate a bank offers on commercial loans.
Lines of credit
A ____ is issued by a bank at the request of an importer and states that the bank will pay a specific sum of money to an exporter on presentation of particular documents.
letter of credit
____ are individuals who inject capitol for start ups in exchange for ownership equity or convertible debt.
angel investors
____ is financing that investors provide to start up companies and small businesses that are believed to have long-term growth potiential.
venture capitol
What is the 2nd step in starting a business after deciding what type of venture you want to start?
figure out where the money will come from
Which is not true about equity financing?
investors will not invest unless they can hold a majority of the stock
Which is considered an non-affiliated angel?
another entreprenuer
What is the benefit of having a secured loan rather than an unsecured loan?
interest rate is lower
The SBA's international trade loan program would fall under which loan cateogory?
special purpose loans
With empowerment zones having influence of the federal government ,the incentives are the same in every state. T/F?
False
____ loans have less stringent requirements for owners equity and collateral than do commercial loans.
SBA
Many ___ loans are smaller sums than most banks are willing to lend.
SBA
The SBA does not make ____ loans.
direct loans; instead it provides loan guarantees to entreprenuers, promising the money to pay back a certian % of your loan if you are unable to
The primary and most flexible SBA loan program?
7(a) loan program
A 7(a) loan can be used for many business purposes. T/F?
True
____ promises quick processing for amounts less than 350,000.
SBA express program
The SBA has a collection of revolving and non-revolving lines of credit called?
CAPlines
A ____ is similar to a credit card, with which you carry a balance that goes up or down, depending on the payments and amounts you borrow.
revolving loan
WIth ____, you borrow a flat amount and pay it off over a set period.
non-revolving lines of credit
What are the 4 loan and line of credit programs that operate under the CAPlines umbrella?
-seasonal line of credit
-contract line of credit
-builders line program
-working capitol line of credit
The SBA's Pre-Qualification Loan program does what?
helps prequality buyers in undeserved markets, including women business owners
The ____ helps entrprenuers get very small loans. MAX ____ years.
Microloan program, 6 years
The ____ provides long-term, fixed rate loans for financing fixed assets, usually real estate and equipment.
CDC/ 504 Loan Program
504 Loans are made through what?
CDCs, Certified Development Companies- nonprofit intermediaries
____ offer tax breaks and other incentives to businesses that locate in certain economically disadvantaged areas.
empowerment or enterprise zones
The ____ is envisioned as a starter program for socially and economically disadvantage businesses.
8(a) program
The simpliest credit policy begins by diligently investigating each company's credit worthiness. T/F?
True
Credit can make or break a small business. T/F?
True
Which party of the loan application will give a complete description of your product line or service offerings?
market information
Which type of insurance protects the business owner for payments in excess of their existing coverage or for liabilites not covered by any other insurance policies.
umbrella coverage
A well thought out credit policy accomplishes 4 things:
-avoids bad debt and hard feelings
-standarizes credit procedures, providing employers with clear and consistent directions
-demonstrates to employees and customers that the company is serious
the simpliest customer credit policy has 2 basic points:
-limiting credit risk
-helps the owner define credit that fits into overall sales and marketing
Your credit application should:
specifiy what your credit terms are and consequences of failing to meet them
In order for your business to accept credit cards, what must the business owner do?
establish merchant status with the credit card companies
The first thing you need to do about accepting credit cards is that banks views this as:
an extension of credit
What is the most common reason a bank may deny your merchant status request?
poor credit
Where is the best place to begin when trying to get merchant status?
the bank that already holds your business accounts
What does the basic business insurance package consist of?
workers compensation, general liability, auto, property/casualty
___ covers medical and rehabilitation costs and lost wages for employees injured on the job - required by law in all 50 states.
workers compensation
In some states, the business owner will be automatically included/excluded in workers compensation insurance. T/F?
True
A visiting sales persons slips on a banana peel in your office and breaks his ankle. What kind of insurance would you need to cover the claim against you/
General liability
The price of comprehensive general liability insurance depends on ____.
the specific risks involved and size of business
What kind of insurance offers more of an opportunity to save money?
Auto
You want to start your own business but you must figure out how much money you will need to live on for the first 6-12 months of your business operation. What do you need to do?
create a budget that shows where you spent your money in the past 12 months
Which type of insurance is written on an all-risk basis?
property/casualty coverage
Who pays for the income you're losing while your business is unable to function?
business interuption coverage
What do many banks require on the business owner before lending money? What are the different types?
life insurance policy; term, permanent, key
What type of insurance can guarantee a fixed amount of income while you are receiving treatment or are recuparating and are unable to work? What is that fixed amount?
disability insurance; 60% of your averaged earned income; aka "income insurance"
What are the basic types of disability coverage?
short term (12 wks-yr), long-term (more than a year)
What is "business overhead" insurance?
an optional add-on to disability insurance which pays for ongoing business expenses, such as: office rental, loan payments, employee salaries, if the business owner is disabled and unable to generate income
Your goal is to find an agent who:
functions as your partner, helping you analyze risks and decide the best course of action
The ability to learn faster from customers is the essential competitive advantage that start-ups must posses? T/F?
True
Branding meshes your marketing, public relations, business plan, pricing, customers, and _________
employees
If the Branding is done right, the buyer will trust and believe in your products so branding ____.
creates value
____ is the companies foundation, creates value, and clarifies your message.
branding
After you develop your branding strategy, you need to manage your feldgeing brand. How do you do that?
keeps ad's brand-focused, be ruthlessly consistent, shed the dead-weight (get rid of things that do not work)
Branding is an important part of one company but shouln't be used for hiring purposes. T/F?
False
What are the 3 steps of the branding strategy?
-set yourself apart
-know your target customer
-develop a personality
Branding strategies should be lengthy, detailed components, to the business plan. T/F?
False
Proper branding means less $ spent on advertising and marketing. T/F?
True
____ refers to the dollar value your brand generates over deceased in the demand it drives and the customer loyalty it creates.
brand equity
A ____ focuses on winning and keeping customer, is strategic in nature, it includes #'s, facts, and objectives that support sales and it also spelled out all the tools and tactics you will use to achieve your sales goals.
marketing plan
____ is an overview of your companies strengths, weaknesses, opportunites, and threats.
situation analysis
Once you define your ____, it will be easier to determine which media will work well for you.
target audience
The main advantage to direct mail is that it allows one on one communication with your target audience. T/F?
True
Your marketing goals need to be ____.
measurable
Setting measurable marketing goals is important, which of the following is the best option when setting marketing goals?
wants sales to increase 5% over last month
According to the planning process described in the text, operational plans flow directly from _____.
tactial plans
A key to securing publicity is to what?
indentifying your target market
A good marketing program targets prospects at:
all stages of your sales cycle
Your hottest prospects are:
individuals who have been exposed to your sales and marketing messages and are ready to close a sale
You should avoid broad-based media, even if it attracts your target audience, if the content is not relevant. T/F?
True
____ is considered the opposite of advertising. AKA "earned media"
public relations
The advantage of magazine ad's is their shelf-life. T/F?
True
A magazine is the best option for reaching a small geographic area. T/F?
False
Ads should attract and appeal to the business owner's self-interest. T/F?
False
Measuring advertising program effectiveness is critical. What is a way to do so?
train employees to ask customers where they heard about you
What does the "R" in the acronym RISE stand for in reference to making sure your newsletter is an effective marketing tool?
recognition
From direct mail, ____ is the type of mail that conveys a sense of urgency.
postcards
Print advertising should not:
include the price of the product or service you have advertised
What is considered the "basic unit of advertising, the foundation head from which all other forms of adv spring?
print advertising
What is the best way to determine where to advertise?
depends on based on your product, method of sales, and audience
A ____ is the building block of marciting materials and it is an info piece that doubles as an image wallet.
brochure
Before making a sales presentation, it is important to:
know the customer's business
What are the advantages/disadvantages of newspapers?
positive- you can get your ad in quickly, disadvantage is short shelf-life- 24 hours
What are the 2 principal publication cateogories to consider for print advertisement?
newspaper and magazine
Armed with the right info, ____ and ___ advertising may deliever more customers than any type of ad campaign.
Tv and radio
How long are standard TV ads in the industry?
30 second spots
What advertising is a good option if you only need to reach a small geographic area?
radio and cable tv
____ encompasses a wide variety of marketing materials; including brochures, catalogs, post cards, newsletters, and sales letters.
direct mail
____ advertising is one of the most effective and profitable ways to reach out to new and existing customers?
direct mail
To create an effective direct mail campaign:
get your name on as many mailing lists as possible, obtain free info every chance you get, take note of your reaction to each piece of mail and save the ones that communicate most effictively
The most effective direct-mail inserts often use ____ and ____.
key words and colors
No matter what type of direct mail you send out, you will need:
a mailing list
One of the best ways to build a mailing list is to:
compile a database using the leads generated by your other forms of advertising
The list you develop using your own customer's names is called:
house list
Two ways to rent a mailing list:
approaching the company you want to rent from directly or using a list broker
A large mailing doesn't cost much more per piece thatn a small mailing and the returns are higher. T/F?
True
For direct mail, what is the average positive response rate?
between 2 and 3%
To recruit employees, the #1 choice is a:
classified ad in your local newspaper
You need at least 15 employees to qualify for the legal requirements of the:
american with disabilites act
____ is much less costly to prepare and mail than other direct-mail efforts, can be mailed overnight, and only takes the flip of the wrist for recipients to get your message.
postcard
A hybrid of the post-card and brochure, ____ give you more room to get your message across than a post-card but are cheaper than a brochure.
flyers
Flyers primary benefit is that they:
covey info quickly
For mail-only entreprenuers, ____ is the backbone of their business.
catalog
____ are a great way to get the word out about your business and keep customers coming back.
newsletters
Newsletters are a good way to reach out to because:
if done correctly, they come off more informative and with less sales hype
The businesses that benefit most from newsletters are:
those that have to educate customers about the advantages of using their products/services
What does "RISE" stand for?
recognition, image, specifics, enactment
Renting a mailing list isn't a good idea for newsletters. T/F?
True
____ are a smart way to reach prospects who are looking for and are prepared to buy what you sell.
classified ads
____ is a cooperative advertising effort between the suppliers and retailers.
co-op advertising
Public relations can include networking at an event. T/F?
True
Publicity is often more expensive than advertising but lasts a lot longer. T/F?
False
When you are trying to promote your company, what is the last step you should always take?
follow-up
Effective follow-up begins immediately after the sale. T/F?
True
Special events, while effective, is a slow-growing area of marketing. T/F?
False
When planning for a special event, what can be high-risk but high return?
celebrity appearances
____ is the exchange of info or services among the individuals, groups, institutions.
networking
Follow-up calls can be considered ____ calls.
business development
Before marking a sales presentation, it is important to:
know the customers business
Your customer service policy should be in writing. T/F?
True
The international trade loan program would fall under which loan cateogory?
special purpose loan
Which is typically used in international trade?
export network capitol program
Generally, workers compensation insurance is determined by:
the state
Subject to some restrictions, according to IRS rules, a no interest loan cannot be more than:
$100,000
A balloon loan requires only the _____ must be paid before the final day of the loan.
interest
Which is not one of the government intervenes in international trade?
marketing
What is an economic reason for government intervention in international trade?
the infant industry argument
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