Questionnaire

Below you will find 65 questions divided into 11 sections designed to test your knowledge about the sources, methods and issues related to the the financing of a SME service firm. For those questions you can not answer, you can click the answer button and it will take you to directly to that part of the text dealing with that subject. We would suggest however, that you try and answer all the questions first because this will provide you with a better indication of how much you know or do not know about the sources and methods of financing a SME.

A. Overall knowledge of financing



1. Do you know what the two basic types of financing are that all businesses use to fund themselves? Answer
2. Can you name three sources of equity funds available to SME's? Answer
3. Can you name five sources of debt financing available to SME's? Answer
4. Do you have full knowledge of your personal financial situation, including personal monthly living expenses, and current values of all your personal assets and liabilities? Answer
5. Do you have full knowledge of your company's financial situation, including monthly cash flows and the current values of assets and liabilities? Answer

   B. Knowledge of your own personal financial situation
   
   

6. Do you know how much money is required monthly to support your family and do you know exactly where the money goes? Answer
7. If you run your business from your home, do you know what personal expenses you can attribute to the business? Answer
8. If you run your business from your home, have you confirmed with your accountant the percentage of the house expenses that you are permitted to write off against the business? Answer
9. Do you know what the current value of your assets are? Answer
10. Do you know how liquid your personal assets are - that is, how quickly you can turn them into cash? Answer

    C. Knowledge of your company's financial situation
    
    

11. Do you keep a monthly record of all the expenses that you have paid on behalf of your company for which the company has not yet repaid you? Answer
12. Do you use the services of a professional accountant? Answer
13. Have you had in-depth conversations with your accountant concerning your company's tax position and the opportunities available for the company to legitimately defer/eliminate taxes? Answer
14. Do you have your accountant prepare a balance sheet for the company at least annually? Answer
15. Do you occasionaly speak to other small businessmen to see what internal company sources they may use to garner internal sources of funds? Answer

    D. Knowledge of different sources of equity funds
    
    

16. Can you describe any sources of equity that you can personnally make available to your business? Answer
17. Can you describe any sources of equity that can be generated by your company? Answer
18. Are you familiar with what the typical prerequisites are for venture capitalists to invest in your firm? Answer
19. Are you familiar with the services offered by the Business Development Bank of Canada? Answer
20. Are you prepared to share the ownership of your business? Answer

    E. Knowledge of the different sources and methods of debt financing?
    
    

21. Can you name three sources of funds that evolve from your personal credit standing? Answer
22. Can you describe how you could use your suppliers to gain access to an additional source of funds? Answer
23. Can you describe how you could use your clients as an additional source of funds? Answer
24. Can you name two sources of external debt financing? Answer
25. Can you specify three methods of borrowing external funds? Answer

    F. Export financing
    
    

26. Can you name two federal government agencies whose mandates include the provision of funds or services related to export? Answer
27. Do you know the name of another federal agency who can often facilitate an exporter's access to financing by acting as the prime contractor between you and the foreign buyer? Answer
28. Can you name two federal departments whose mandates include helping SME exporters? Answer
29. Do you know the three political risks and four commercial risks covered by an EDC export credits insurance policy? Answer
30. Have you heard of NEXPRO? Answer

    G. Knowledge of the typical conditions applicable to an operating line of credit (Preparing to negotiate an operating loan)
    
    

31. Do you know on what basis the financial institutions would calculate the amount of the facility they would agree to lend you? Answer
32. Do you know the purpose for which you would usually borrow under an operating loan and how a SME service enterprise would be different from a non-service SME? Answer
33. Do you know the implications of the phrase "repayable on demand"? Answer
34. Do you know how the interest rate charged on an operating line is calculated and paid? Answer
35. Do you think it is appropriate for the financial institution to charge a modest fee for setting up the facility for you? Answer
36. Do you have enforceable contracts and related regular invoicing that will enable a financial institution to advance funds against accounts receivable? Answer
37. Are you prepared to give a personal guarantee in support of your request for an operating line? Answer
38. Do you think your lender would be concerned if the amount of funds borrowed by you is in excess of the security formula used to calculate the available funds? Answer
39. Do you think your lender would be concerned if the amount of the funds borrowed, somehow or other, exceeds the limit agreed to under the facility? Answer
40. Are you prepared to provide the financial institution with whatever information it deems reasonable and appropriate to be able to analyse your application, including personal and company financial statements? Answer

    H. Knowledge of the typical conditions of a term loan (Preparing to negotiate a term loan)
    
    

41. Do you have to buy fixed assets ( assets with a life greater than one year) or do you already have some fixed assets? Answer
42. If your equipment is used, do you have a recent market evaluation of those assets? Answer
43. Do you think the rate charged on a term loan should be higher than that on an operating loan? Answer
44. Would you know a "fair deal" when you saw one in relation to a term loan? Answer
45. Can you give at least one difference between an operating loan and a term loan? Answer
46. Can you give two positive covenants (actions to be completed by the borrower) that might apply to a term loan? Answer
47. Can you give two negative covenants (actions to be avoided by the borrower) that might apply to a term loan? Answer
48. Do you think it is acceptable to have to report your financial position to your lender on a quarterly basis? Answer
49. Can you give two events of default that would enable your lender to recall its loan? Answer
50. Do you know how many days a lender might give you to correct an event of default? Answer

    I. Preparing for a relationship with a lender
    
    

51. Would you consider your lender to be your financial "partner"? Answer
52. Can you give three or more important considerations on which a lender focusses when deciding whether or not to lend you money? Answer
53. Are you prepared to take the time to develop a rapport with your lender, to help your account manager learn the intracacies of your business, and then possibly to have to do it again when the account manager gets transferred? Answer
54. Do you think it is reasonable to have to advise your financial institution as soon as you become aware of any bad news related to your company? Answer
55. Can you list four or more responsibilities your lender has towards you? Answer

    J. Your knowledge of the paperwork involved in dealing with a lender
    
    

56. Can you name five documents that a lender would require as part of any loan agreement entered into with your company? Answer
57. Do you understand why a lender would request financial projections? Answer
58. Can you name the three statements that make up financial projections? Answer
59. Can you say which one is likely the most important and why? ANSWER
60. Do you understand why a lender would ask for a personal statement of affairs and tax returns, even though the loan is to be made to your company? Answer

    K. Knowledge of which financial insitutions to go to for your needs
    
    

61. Can you name three types of financial insitutions that would likely be able to help a SME service firm? Answer
62. Can you name one type of financial insitution that is not likely to be a source of funds for a SME service firm? Answer
63. Can you say how a trust company and a domestic bank are similar in terms of the products they could put at your disposal? Answer
64. Can you list three business-related products offered by insurance companies that might apply to a SME? Answer
65. Do you know how equipment finance companies and domestic banks may be similar? Answer