SBA Financial Management & Funding Resources 2 — Questions and Answers
Question 1: Which SBA loan program is specifically designed to provide microloans up to $50,000 to small businesses and certain non-profit childcare centers?
- SBA 7(a) Loan Program
- SBA 504 Loan Program
- SBA Microloan Program (Correct answer)
- SBA Export Loan Program
Correct answer: SBA Microloan Program
The SBA Microloan Program provides loans up to $50,000 through nonprofit intermediary lenders to help small businesses start up and expand.
Question 2: A small business owner wants to purchase a commercial building to house their operations. Which SBA loan program is MOST appropriate for this long-term fixed asset acquisition?
- SBA 7(a) Standard Loan
- SBA 504 Loan Program (Correct answer)
- SBA Microloan Program
- SBA CAPLines Revolving Credit
Correct answer: SBA 504 Loan Program
The SBA 504 Loan Program is designed for major fixed assets like real estate and heavy equipment, offering long-term, fixed-rate financing.
Question 3: What is the maximum loan amount available under the standard SBA 7(a) loan program?
- $1 million
- $2 million
- $5 million (Correct answer)
- $10 million
Correct answer: $5 million
The maximum loan amount for the SBA 7(a) program is $5 million, making it the primary program for a wide range of business financing needs.
Question 4: In SBA financial analysis, what does the Debt Service Coverage Ratio (DSCR) measure?
- The ratio of total debt to total equity
- The ability of business cash flow to cover loan payments (Correct answer)
- The percentage of revenue used for operating expenses
- The liquidity available to pay short-term obligations
Correct answer: The ability of business cash flow to cover loan payments
DSCR measures whether a business generates enough net operating income to cover its debt obligations, with most lenders requiring a ratio of 1.25 or higher.
Question 5: Which financial statement shows a business's revenues, expenses, and profit or loss over a specific period of time?
- Balance Sheet
- Cash Flow Statement
- Income Statement (Correct answer)
- Statement of Retained Earnings
Correct answer: Income Statement
The Income Statement (also called Profit & Loss Statement) summarizes revenues and expenses over a reporting period to show net profit or loss.
Question 6: What is the primary purpose of the SBA's SBIC (Small Business Investment Company) program?
- To provide direct government loans to small businesses
- To license private investment funds that provide equity and debt capital to small businesses (Correct answer)
- To guarantee bank loans for minority-owned businesses
- To offer grants to technology startups
Correct answer: To license private investment funds that provide equity and debt capital to small businesses
SBICs are privately owned and managed investment funds licensed by the SBA that use their own capital plus SBA-guaranteed debentures to make equity and debt investments in small businesses.
Question 7: A business has current assets of $150,000 and current liabilities of $75,000. What is its current ratio?
- 0.5
- 1.5
- 2.0 (Correct answer)
- 2.5
Correct answer: 2.0
Current ratio = Current Assets ÷ Current Liabilities = $150,000 ÷ $75,000 = 2.0, indicating the business has $2 in current assets for every $1 in current liabilities.
SBA Financial Management & Funding Resources 2
Which SBA loan program is specifically designed to provide microloans up to $50,000 to small businesses and certain non-profit childcare centers?