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

Equity financing involves the buyer contributing personal capital or bringing in investors rather than relying solely on debt.

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 PFS shows a broker and lender whether the buyer has the net worth, liquidity, and credit standing needed to complete the acquisition and sustain operations.

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

Layered financing combines multiple funding sources—bank debt, seller notes, equity—to meet the total purchase price when no single source suffices.

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 enable financing of intangible assets like goodwill that conventional lenders typically won't fund, opening acquisition financing to more buyers.

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

Collateral provides lenders security by giving them a claim on specific assets if the borrower defaults on the loan.

(CBB) Certified Business Brokers Practice Test

(CBB) Certified Business Brokers Practice Test

CBB CBB Buyer Qualification & Acquisition Financing 2