Loans Business Loans

Question 1

What is the primary purpose of the SBA 7(a) loan program in the United States?

Accepted Answer

To offer government-backed loans to small businesses that may not qualify for conventional financing

Answer

To provide home mortgages for small business owners

Answer

To fund federal government contractors exclusively

Answer

To provide grants that do not require repayment

Question 2

What is a business line of credit?

Accepted Answer

A revolving credit facility allowing businesses to borrow up to a set limit as needed

Answer

A lump-sum loan repaid over a fixed term

Answer

A government grant for startup businesses

Answer

A loan that converts to equity if not repaid

Question 3

Which financial statement do lenders most closely analyze to assess a business's ability to service debt?

Accepted Answer

Cash flow statement and income statement

Answer

Balance sheet only

Answer

Owner's personal tax return only

Answer

Business insurance policy

Question 4

What is a Debt Service Coverage Ratio (DSCR) of 1.25 indicating for a business loan applicant?

Accepted Answer

The business generates $1.25 in net operating income for every $1.00 of debt service

Answer

The business has $1.25 in debt for every $1.00 of assets

Answer

The loan-to-value ratio is 125%

Answer

The business has 25% more debt than equity

Question 5

What is invoice financing (accounts receivable financing)?

Accepted Answer

A form of short-term borrowing where outstanding invoices are used as collateral

Answer

A loan secured by business real estate

Answer

A grant program for businesses with unpaid taxes

Answer

A type of equipment lease

Question 6

Which of the following best describes a merchant cash advance (MCA)?

Accepted Answer

An advance on future credit/debit card sales, repaid through a percentage of daily sales

Answer

A traditional term loan from a bank

Answer

A government-subsidized loan for minority-owned businesses

Answer

A revolving credit line based on business inventory