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Entrepreneurship Building Blocks
5 C's of Credit
Debt Funds
Debt Financing Category
Commercial Banks
100
These are assets that will be converted into cash within one year.
What are Short-term assets?
100
Capacity, capital, collateral, character, and conditions.
What are the 5 C's of credit?
100
Also known as liabilities, these are borrowed from a creditor and of course must be repaid.
What are debt funds?
100
This is the use of borrowed funds to finance a business.
What is debt financing?
100
The backbone of the credit market, offering the widest assortment of loans.
What areis a commerical Banks?
200
These are assets that will not be converted into cash within one year.
What are Long term assets?
200
This is the applicant's ability to repay the loan.
What is Capacity?
200
The use of debt to finance a busines creates this.
What is leverage?
200
This is the original amount of money to be borrowed.
What is the principal of a loan?
200
Loans in which the bank does not require any collateral as long as the entrepreneur has a good credit standing.
What are unsecured loans?
300
This and inventory is one of the most common short term assets.
What is cash?
300
The value of assets minus the value of liabilities determines this.
What is capital?
300
This determines the "price" of the borrowed funds.
What is the interest rate?
300
An agreement between a bank and a business that specifies the amount of unsecured short term funds the bank will make available to a business.
What is a line of credit?
400
Buildings and this are some of the most common long term assets.
What is equipment?
400
Assets owned by the applicant that can be pledged as security for the repayment of the loan constitute collateral.
What is collateral?
400
This is the goal in using leverage.
What is put in a little money and get back a lot?
400
This refers to the intervals at which you pay interest.
What is compounding of interest?
400
A loan made to a small business for a specific period of time, to be repaid in a lump sum at maturity.
What is a demand note?
500
This is a lender, usually a successful entrepreneur who loans money to help new businesses.
What is an Angel?
500
The general economic climate at the time of the loan application may affect the applicant's ability to repay the loan.
What is conditions?
500
Money supplied by investors in exchange for an ownership position in the business. This does not need to be repaid.
What are equity funds?
500
This refers to the length of time for which a borrower obtains the use of the funds.
What is maturity?
500
Loans made to businesses in which only small periodic payments are required over the life of the loan, with a large lump-sum payment due at maturity.
What is a Balloon note?