SBA Financial Management & Funding Resources 3

Question 1

Under the SBA 504 loan program, what is the typical structure of the financing arrangement?

Accepted Answer

Bank provides 50%, CDC/SBA provides 40%, borrower contributes 10%

Answer

The typical 504 structure is: a private lender covers 50%, a CDC (backed by an SBA debenture) covers 40%, and the small business contributes 10% as a down payment.

Question 2

Which type of financial analysis compares each line item on a financial statement as a percentage of a base figure (e.g., total revenue)?

Accepted Answer

Vertical analysis

Answer

Vertical analysis expresses each financial statement item as a percentage of a base figure, such as expressing all income statement items as a percentage of total revenue.

Question 3

What is the SBA's primary role in the 7(a) loan program?

Accepted Answer

The SBA guarantees a portion of loans made by approved lenders

Answer

In the 7(a) program, the SBA does not lend directly but instead guarantees a portion (up to 85%) of loans made by SBA-approved private lenders, reducing lender risk.

Question 4

Which of the following is NOT a typical use of proceeds for an SBA 7(a) loan?

Accepted Answer

Paying personal income taxes of the business owner

Answer

SBA 7(a) loans cannot be used to pay personal expenses, including the owner's income taxes; funds must be used for legitimate business purposes.

Question 5

In the context of SBA lending, what does 'collateral' primarily serve to protect?

Accepted Answer

The lender in case the borrower defaults on the loan

Answer

Collateral provides the lender with a secondary source of repayment if the borrower defaults, reducing the lender's financial risk on the loan.

(SBA) Small Business Administration Certified Business Practice Test

(SBA) Small Business Administration Certified Business Practice Test

SBA Financial Management & Funding Resources 3