Financial Management & Funding Resources Flashcards

A startup business has no operating history. What type of financial document will lenders typically require to evaluate future repayment ability?

Answer: Pro forma financial projections

Pro forma financial projections (projected income statements, balance sheets, and cash flow statements) show lenders how a startup anticipates generating revenue and repaying the loan.

Which term describes the point at which a business's total revenues equal its total costs, resulting in neither profit nor loss?

Answer: Break-even point

The break-even point is where total revenue equals total costs (fixed + variable), meaning the business covers all expenses but has not yet generated profit.

Under SBA guidelines, which of the following would typically classify a business as a 'small business' for manufacturing?

Answer: Fewer than 500 employees

For most manufacturing industries, the SBA size standard is based on the number of employees, typically 500 employees or fewer, though this varies by NAICS code.

Which document summarizes a business's assets, liabilities, and owner's equity at a specific point in time?

Answer: Balance Sheet

The Balance Sheet (Statement of Financial Position) provides a snapshot of what a business owns (assets), owes (liabilities), and the owners' stake (equity) on a specific date.

What is 'working capital' in small business financial management?

Answer: Current assets minus current liabilities

Working capital = Current Assets − Current Liabilities, representing the liquid resources available to fund day-to-day business operations.

The SBA's Lender Match tool is designed to help small business owners do what?

Answer: Connect with SBA-approved lenders who may offer suitable loans

Lender Match is a free SBA online referral tool that connects small business owners with participating SBA-approved lenders based on their financing needs.

Which funding source allows a business owner to raise capital by selling partial ownership stakes to investors without incurring debt?

Answer: Equity financing

Equity financing involves selling ownership shares (stock or partnership interests) to investors in exchange for capital, with no repayment obligation but dilution of ownership.