Posted: September 17th, 2017

# Identify and briefly describe four basic SBA credit programs.

Chapter 12: Discussion Questions: #2, #7, and #13 p. 450

2.Name three of the common loan restrictions and explain how they relate to new venturing financing. What

are some additional common loan restrictions?

7.Identify and briefly describe four basic SBA credit programs.

13. What are some characteristics of a Community Development Financial Institutions (CDFI) loan?

Chapter 12: Exercises/Problems: #2 p. 451

2.

[Factor Financing] Assume that the operation of your business resulted in sales of \$730,000 last year. Year-end receivables are \$100,000. You are considering factoring the receivables to raise cash to help finance

your venture’s growth. The factor imposes a 7 percent discount and charges an additional 1 percent for each

expected ten-day average collection period over thirty days.

A. Estimate the dollar amount you would receive from the factor for your receivables if the collection period

was thirty days or less.

B. Estimate the dollar amount you would receive from the factor for your receivables if the average collection

period was sixty days.
C. Show how your answer in Part B would change if the factor charges an 8 percent discount and charges an

additional 0.5 percent for each expected fifteen-day average collection period over thirty days.

D. If the \$730,000 in sales last year were evenly distributed throughout the year, an average \$100,000 in

receivables outstanding would imply what average collection period? Given the original terms stated in the

problem, what dollar amount would you expect to receive for your receivables?

Chapter 12: Jen and Larry’s Frozen Yogurt Mini Case p. 452 B.

If inventories are expected to turn over ten times a year (based on cost of goods sold), what will be the

venture’s average inventories balance next year if sales are \$1.2 million? How much might the venture be able

to borrow if a lender typically lends an amount equal to 50 percent of the average inventories balance? If the

borrowing rate is 12 percent, how much dollar amount of interest would have to be paid on the loan?

C. How might the venture acquire and finance the new equipment that is needed?

D. Identify potential government credit resources for the venture.

E. Prepare a summary of the benefits and risks of Jen and Larry’s continued use of credit card financing.

F. Prepare a summary of how the venture might benefit from receivables financing if commercial customers are

extended credit for thirty days on their purchases.

G. Discuss the impact of potential loan restrictions should the venture seek commercial loan financing.

H. Comment on how the venture might be evaluated in terms of the five Cs of credit

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