CBB CBB Buyer Qualification & Acquisition Financing 2

Question 1

What does 'equity financing' mean in the context of a business acquisition?

Accepted Answer

Funding the purchase by issuing ownership shares or using the buyer's own capital rather than borrowing

Answer

Using a line of credit to purchase the business

Answer

Securing financing using the business's real estate as collateral

Answer

A government grant program for business buyers

Question 2

What is a 'personal financial statement' (PFS) and why do brokers request it?

Accepted Answer

A comprehensive snapshot of an individual's assets, liabilities, and net worth used to assess financial capacity

Answer

A document listing the buyer's professional certifications

Answer

A business plan submitted with a loan application

Answer

A credit report from a major credit bureau

Question 3

When a buyer uses a combination of bank financing and seller financing, this structure is often called a:

Accepted Answer

Layered or blended financing structure

Answer

Double close

Answer

Leveraged buyout (LBO)

Answer

Equity rollover

Question 4

What is the key benefit of SBA financing over conventional bank loans for business acquisitions?

Accepted Answer

SBA loans allow lower down payments and can finance goodwill, making more acquisitions feasible

Answer

SBA loans have lower interest rates than any market alternative

Answer

SBA loans do not require personal guarantees from the buyer

Answer

SBA loans close faster than conventional loans

Question 5

What does a lender mean when they require 'collateral' for a business acquisition loan?

Accepted Answer

Assets pledged by the borrower that the lender can seize if the loan is not repaid

Answer

The lender requires the buyer to have business insurance

Answer

A co-signer who guarantees the loan repayment

Answer

Proof that the buyer has industry experience

Question 6

Which buyer profile characteristic most concerns a lender evaluating a business acquisition loan?

Accepted Answer

The buyer having no relevant industry experience and no management background

Answer

The buyer being younger than 40 years old

Answer

The buyer intending to hire a general manager to run the business

Answer

The buyer having previously owned a successful business