Question

Which of the following is a good guideline regarding the salary for the entrepreneur of a start-up business?

A. It should be $0 and the entrepreneur should live off his/her savings until profits are generated by the business.

B. It should be equal to the prevailing average for similar jobs in the market.

C. It should be increase rapidly when the business starts to earn profits.

D. None of the above

Q. Which of the following does the SBA (Small Business Administration) provide to the businesses it works with in its 7(A) program?

A. None of these

B. Advice and guidance about how to better operate the business

C. Guarantees to lenders that if businesses cannot pay back what they have borrowed, the SBA will step in to do so.

D. All of these

E. Funding for the business's operations

Answer 1

1.

In case of a start up business, initially heavy costs are incurred to establish the brand, for advertisements and to make the product popular among the potential customers. Hence, initially due to heavy costs, profits might not occur or there may be very low profits. Hence, the salary for the entrepreneur of a start-up business should be $0 and the entrepreneur should live off his/her savings until profits are generated by the business. Once sufficient profits start occurring,salary may be withdrawn and it can be gradually increased.

Hence, correct option is (A)

2.

Under 7(A) program, Small Business Administration provides loan guarantees to the lenders so that lenders do not hesitate in providing loans to small businesses. As a loan guarantor, Small Business Administration assures lenders that their money is safe and in case of any default by the borrowing person, Small Business Administration will make payment of loan.

Hence, correct option is (C)

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