Discover What You Don’t Know: Test Your Knowledge of Small Business Financing Options Today

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Financing a small business

Welcome to the small business financing Quiz! This quiz will test your knowledge of small business financing options to help you understand your funding options. Are you ready to put your knowledge of funding options to the test?

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1. What is the most common source of financing a small business?

Angel or Venture capital

Bootstrapping

Crowdfunding

Small Business Administration (SBA) loans

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2. What is factoring?

A type of government grant for small businesses

Borrowing money from family and friends

Borrowing by pledging unincumbered tangible assets as collateral for quick cash

Selling accounts receivable to a third party at a discount for immediate cash

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3. What is the downside of using a personal loan to finance a business?

Exposes the borrower to a loss of their liability protection

The loan amount is typically too small for business needs

The borrower exposes themselves to potential risk when the business fails to provided sufficient profits for borrower to meet loan obligations

Personal loans cannot be used for any business expenses

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4. What is a very common source of financing for small businesses?

Credit card debt

Donations from family and friends

Home equity loans

Selling personal assets

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5. What is an angel investor?

A close friend or family member who invests in the founder of a small business

An investor who provides funds as well as mentorship and industry expertise in exchange for equity in the company

An investor who provides a high-risk loan to the company with a high-interest rate

An investor who donates funds for the company without any expectation of a return

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6. What is crowdfunding?

Borrowing money from family and friends

Selling ownership in the company to investors

Raising money from unrelated people through an online platform

A specific type SBA backed loan from a bank or financial institution

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7. What is the disadvantage of using personal savings to finance a small business?

Limited tax benefits

Without a loan, it decreases the pressure to achieve profitability

Potential loss of personal funds

Reduces the borrower’s credit score making it harder to borrow money

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8. What is a line of credit?

A loan that is repaid in a lump sum at the end of the term

A loan that is secured by collateral

A loan that is repaid in installments over time

A type of financing that allows businesses to access funds as needed up to a certain limit

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9. What is the biggest disadvantage of seeking venture capital funding for a business?

Giving up ownership and control

High-interest rates

Short repayment terms

Limited loan amounts

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10. At what stage of a business is seed funding typically sought?

When the business is generating revenue

When the business is in the ideation stage

When the business is looking to expand

When the business is preparing to go public with an Initial Public Offering (IPO)

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11. What is a key advantage of using factoring as a financing option for a small business?

It allows the business to sell unused assets for quick cash

It provides a fixed interest amount

It provides cheap access to capital

It keeps the business from taking on debt or giving up control

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12. What is an advantage of a merchant cash advance for businesses?

No collateral is required

Repayment rates based on sales

No credit check is required

All of the above

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13. Which of the following is NOT an example of a direct lender for a small business loan?

A bank

The Small Business Administration (SBA)

A credit union

An online lender

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14. What is the main advantage of using an angel investor as a financing option for a small business?

They provide free money that does not need to be repaid

They can provide expertise and guidance in addition to funding

They have lower interest rates than traditional lenders

They are easy to find

Your score is

The average score is 95%

Discover What You Don’t Know: Test Your Knowledge of Small Business Financing Options Today

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