ESB - Certified Entrepreneurship and Small Business Specialist Funding and Capital Sources Questions and Answers

Question 1

An entrepreneur needs to purchase $50,000 worth of new equipment to scale production.
They want to maintain full ownership of their company and have a strong credit history.
Which funding source is most appropriate for this situation?

Accepted Answer

A traditional bank loan

Answer

Venture Capital

Answer

Angel Investor

Answer

Issuing company stock

Question 2

The process of funding a venture by soliciting small individual investments from a large number of people, typically via an online platform, is known as:

Accepted Answer

Crowdfunding

Answer

Factoring

Answer

A line of credit

Answer

Bootstrapping

Question 3

Which of the following best describes the primary role of the Small Business Administration (SBA) in the loan process?

Accepted Answer

It reduces the risk for partner lenders by guaranteeing a portion of the loan.

Answer

It directly lends government funds to the entrepreneur.

Answer

It purchases an equity stake in the small business.

Answer

It sets a fixed 0% interest rate for all approved business loans.

Question 4

A tech startup in the seed stage has a promising but unproven concept and needs initial capital for product development. The founders have limited personal funds and no collateral. Which type of investor would be MOST interested in this high-risk, early-stage opportunity?

Accepted Answer

An angel investor

Answer

A commercial bank

Answer

A venture capital firm focused on late-stage growth

Answer

A government grant agency for established businesses

Question 5

What is a primary characteristic of 'bootstrapping' as a method of business financing?

Accepted Answer

It relies on the founder's personal finances and revenue from the business.

Answer

It involves raising millions of dollars from a venture capital firm.

Answer

It is exclusively available through government-sponsored grant programs.

Answer

It requires the business to be publicly traded on the stock market.

Question 6

Compared to an angel investor, a venture capital (VC) firm is more likely to:

Accepted Answer

Invest a larger amount of pooled capital in exchange for a significant equity stake.

Answer

Invest smaller sums of personal money.

Answer

Get involved in a business at the initial idea stage.

Answer

Have a less formal and faster due diligence process.

An entrepreneur needs to purchase $50,000 worth of new equipment to scale production.They want to maintain full ownership of their company and have a strong credit history.Which funding source is most appropriate for this situation?

An entrepreneur needs to purchase $50,000 worth of new equipment to scale production.
They want to maintain full ownership of their company and have a strong credit history.
Which funding source is most appropriate for this situation?