Accounts Receivable Financing is the selling of a company's accounts receivable, at a discount, to a factor, which then assumes the risk of the account debtors and receives cash as the debtors settle their accounts. A firm that sells its accounts receivable may not be confident of its ability to collect those debts, or might think that the cost of collecting that debt is more than the discount, which must be provided to the factor when of selling their receivables. Also called accounts receivable financing.
Angel Investor is an individual who provides capital to one or more startup companies. The individual is usually affluent or has a personal stake in the success of the venture. High levels of risk and a potentially large return on investment characterize such investments.
Asset is any item of economic value owned by an individual or corporation, especially that which could be converted to cash (cash, securities, accounts receivable, inventory, office equipment, real estate, a car, property, other liquid items, real estate, plant, equipment, prepaid and deferred assets, expenditures for future costs (insurance, rent, interests) and intangible assets (trademarks, patents, copyrights, goodwill).
Asset-Backed is a loan, lease, mortgage, etc. secured by receivables, equipment, inventory, real estate, or other hard assets that may also include intangible assets like IP, patents and goodwill. For investors it's an alternative to investing in stock.
Asset Backing is support for a share price provided by the value of the company's assets
Asset Financing uses balance sheet assets (such as accounts receivable, short-term investments or inventory) to obtain a loan or borrow money - the borrower provides a security interest in the assets to the lender. The company pledges assets in exchange for cash loan.
Accredited Investor is a term used by the Securities and Exchange Commission (SEC) under Regulation D to refer to investors who are financially sophisticated and have a reduced need for the protection provided by certain government filings. Accredited investors include individuals, banks, insurance companies, employee benefit plans, and trusts. www.sec.gov/info/smallbus/qasbsec.htm#eod
Bond is a debt instrument issued for a period of more than one year with the purpose of raising capital by borrowing. Generally, a bond is a promise to repay the principal along with interest (coupons) on a specified date (maturity). Some bonds do not pay interest, but all bonds require a repayment of principal. When an investor buys a bond, they are a creditor of the issuer without the ownership rights to the issuer, unlike in the case of equities. Bondholders have a greater claim on an issuer's income than a shareholder in the case of financial distress. The yield from a bond is made up of three components: coupon interest, capital gains and interest on interest.
Bridge Loan is a short-term financing which is expected to be paid back relatively quickly, such as by a subsequent longer-term loan. also called swing loan or bridge financing.
generally have similar fee schedules, however others have complex fee structures with hidden fees. Broker resellers may use their fee structure as a selling point, but have additional hidden fees.
is a person or organization that buys in the usual manner from a person in the business of selling such goods and who does so in good faith and without knowledge that the sale violates another person's ownership rights or security interest in the goods. Such a buyer will have good title to the item purchased.
is a lease that meets one or more of the following criteria, meaning it is classified as a purchase by the lessee: the lease term is greater than 75% of the property's estimated economic life; the lease contains an option to purchase the property for less than fair market value; ownership of the property is transferred to the lessee at the end of the lease term; or the present value of the lease payments exceeds 90% of the fair market value of the property.
is the revenue or expense stream that changes a cash account over a given period and typically arises from profits, financing, investing, donations while outflow results from expenses or repayments. This holds true for both business and personal finance. Cash flow is often used as an indication of a company's financial strength.
is an association dedicated to a particular interest or activity.
is a broker who is compensated with a percentage of the value of the transacted assets.
is a life insurance policy purchased by a borrower that pays off one or more existing debts in the event of a death, disability, or in rare cases, unemployment.
is raising money for working capital or capital expenditures by selling bonds, bills, or notes to individual and/or institutional investors. In return for lending the money, the individuals or institutions become creditors and receive a promise that the principal and interest on the debt will be repaid.
Debtor In Possession
is a company that continues to operate while going through Chapter 11 bankruptcy proceedings.
(Earnings Before Interest, Taxes, Depreciation and Amortization) is a key indicator of a company's financial performance and value. EBITDA is essentially net income with interest, taxes, depreciation, and amortization added back to it, and can be used to analyze and compare profitability between companies and industries because it eliminates the effects of financing and accounting decisions.
Equipment Lease is usually for a short term, in which the lessee does not have any purchase or renewal option. also called true lease
is capital raised by owners who surrender a percentage of ownership.
is raising money for company activities by selling common or preferred stock to individual or institutional investors. In return for the money paid, shareholders receive ownership interests in the corporation.
is any organization, association or group that provides or maintains a marketplace where securities, options, futures, or commodities can be traded; or the marketplace itself open only to its Members.
is an individual who acts as a 'catylist' by helping a team(s) with issues such as communications or problem solving but, typically, does not contribute to the actual content or management of a team's project (which is a team leader's function).
is the selling of a company's accounts receivable, at a discount, to a factor, which then assumes the credit risk of the account debtors and receives cash as the debtors settle their accounts. also called accounts receivable financing.
is outline the financial activities of a business, an individual or other entity to present the financial information clearly and concisely as possible, They typically include: income statements, balance sheet, statements of retained earnings and cash flows, as well as other relevant information.
is providing funds for business activities, making purchases or investing.
is a form of business organization in which a firm which already has a successful product or service (the franchisor) enters into a continuing contractual relationship with other businesses (franchisees) operating under the franchisor's trade name and usually with the franchisor's guidance, in exchange for a fee.
(Generally Accepted Accounting Principles) is a set of authoritative accounting principles, standards and procedures set by policy boards to compile financial statements. They provide investors a minimum level of consistency in the financial statements to use when analyzing companies for investment purposes.
reflects the value of intangible assets such as a strong brand, good customer relations, relations and patents or proprietary technology. Goodwill often appears on the balance sheet of the acquirer in the amount by which the purchase price exceeds the net tangible assets of the acquired company.
is for businesses with intellectual property that provides them unique value in their marketplace enabling organic growth to the point where traditional capital raising is a viable option.
Hard Money Loan
is a loan for borrowers who are seeking to take out a loan, typically for real estate, but who are not eligible for other loans. A hard money loan consists of high fees and an elevated interest rate, which makes them less desirable by borrowers. Instead of using the borrower's credit history as collateral, some type of physical property is used a leverage. Traditional banks do not offer this type of loan.
In-Ground Asset Financing
is typically a loan against minerals, gas and oil that have yet to be recovered.
is something of value that cannot be physically touched, such as a brand, franchise, trademark, or patent, the opposite of tangible asset.
Internal Growth Rate
is the highest level of growth achievable for a business without obtaining outside financing. A firm's maximum internal growth rate is the level at which growth from general business operations can continue to fund and grow the company. For startup firms and small business the internal growth rate is an important ratio to follow, since it measures a firm's profitable increase in top-line revenues.
Internal Rate Of Return (IRR)
is the discount rate often used in capital budgeting that makes the net present value of all cash flows from a particular project equal to zero.
is the purchase of a financial product or other item of value with an expectation of favorable future returns. In general terms, investment means the use money in the hope of making more money. Investing is the purchase by a producer of a physical good, such as durable equipment or inventory for improving future business.
is an asset or item that is purchased with the hope that it will generate income or appreciate in the future.
is a group of "retail" investors, not necessarily "accredited", who pool their money to make joint investments and collectively deciding how to invest the money. Members of investment clubs do not need to invest only through the club, so the club can make an excellent addition to a portfolio or it can serve as an excellent introduction to investing as an individual. Clubs can be a benefit to investors of all skill and experience levels. Members are often required to, contribute at least a certain amount to the club's investment pool (pre-funding). Clubs are beneficial because more people are involved, research can be more thorough and cover more investment opportunities. Properly structured club can operate as unregulated. Investment Clubs
is a firm that invests the pooled funds of "retail" or "institutional" investors for a fee. An investment fund provides individual investors access to a wider range of securities than the investors themselves would have been able to access.
is a written agreement under which a property owner allows a tenant to use the property for a specified period of time and rent. Sale and Leaseback is an arrangement in which one party sells a property to a buyer and the buyer immediately leases the property back to the seller. This arrangement allows the initial buyer to make full use of the asset while not having capital tied up in the asset. Leasebacks sometimes provide tax benefits. Also called leaseback.
Lender is an individual, or a public or private group who makes funds available to s third party with the expectation that the funds will be repaid, plus any interest and/or fees.
Leasing is an agreement in which one party gains a long-term rental (use) agreement, and the other party receives a form of secured long-term debt. Sale and Leaseback is another form of leasing arrangement in which one party sells a property to a buyer and the buyer immediately leases the property back to the seller. This arrangement allows the initial buyer to make full use of the asset while not having capital tied up in the asset. Leasebacks sometimes provide tax benefits. Also called leaseback.
Letter of Credit is a binding document that a buyer requests from a a bank, firm or investor in order to guarantee that the payment for goods will be transferred to the seller. A seller must present the lender with the necessary shipping documents confirming the shipment of goods within a given time frame. It is often used in international trade to eliminate risks such as unfamiliarity with the foreign country, customs, or political instability.
Line of Credit is an arrangement with a bank, firm or investor that extends a specified amount of unsecured credit to a specified borrower for a specified time period. Also called credit line.
Loan is an arrangement in which a lender (bank, firm or investor) gives money or property to a borrower, and the borrower agrees to return the property or repay the money, usually along with interest, at some future point(s) in time. Usually, there is a predetermined time for repaying a loan, and generally the lender has to bear the risk that the borrower may not repay a loan (though modern capital markets have developed many ways of managing this risk).
Loan; Hedge-Fund are loans to higher risk businesses that are asset or IP backed companies. These loans offer greater flexibility than that experienced with conventional lenders and access to funds is usually quick. BBorrowing costs high and prepayment penalties can be severe.
Loan; Peer-to-Peer can include family, friends or strangers who are interested participating. Peer-to-Peer loans can be a formal or informal providing the benefits of quick access to cash and flexibile repayment terms.
Loan; Customer Lenders are business customers. To borrower must be well-established, possess a good list of customers and have earned the trust of those customers.
Loan; Credit Cards are often used by owners to start or fund a business. The obviuos benefit is easy and early access to cash if the credit history is good. Credit card financing is usually limited in the amount available to borrowers based on the borrower's demonstrated ability to earn and repay the loan.
Loan; Vendor Lenders are business vendors. To borrower must be well-established, possess a good list of customers and have earned the trust of those vendors.
Loan; Venture-Capital-Backed Lenders are bank-based lending source limited to a small group of qualifying companies and usually geographically concentrated. The benefits of these loans to borrowers are access to bank lenders previously unavailable to the company, quicker access due to the pre-screening by the venture capital firm and access to bank financing with a higher risk threshold than a stand-alone bank loan. Loans come with a high interest rate and future stock warrants or other equity participation.
Market is any place where the sellers of a particular good or service can meet with the buyers of that goods and service where there is a potential for a transaction to take place. The buyers must have something they can offer in exchange for there to be a potential transaction.
M&A is the acronym for mergers and acquisitions.
Merger is he combining of two or more entities into one, through a purchase acquisition or a pooling of interests. Differs from a consolidation in that no new entity is created from a merger.
Mezzanine Debt typically incorporates equity-based options, such as warrants, with a lower-priority debt. Mezzanine debt is resembles equity more than debt, in that the debt and is often used to finance acquisitions and buyouts, where it can be used to prioritize new owners ahead of existing owners in the event that a bankruptcy occurs.
Mortgage is a loan to finance the purchase of real estate, usually with specified payment periods and interest rates. The borrower (mortgagor) gives the lender (mortgagee) a lien on the property as collateral for the loan.
Mortgage-Backed Security (MBS) is a loan backed by real estate.
is a physical asset, such as real estate or personal property. opposite of financial asset.
is a transaction that does not involve purchase, conversion to, or future rights to purchase stock in or related to the enterprise.
is a lease for which the lessee acquires the property for only a small portion of its useful life. An operating lease is commonly used to acquire equipment on a short-term basis. Any lease that is not a capital lease is an operating lease.
is the relationship of an owner of something "possessed" with the right to transfer "possession" to another. "Investing" in securities (stock) for example incurrs "ownership" verses "financing" being an transaction between "borrower and a lender" without possession.
is a loan made by an insurance company to a policyholder on the security of the cash value of the policy
Pooling of Interests
is a method of accounting for a company merger, in which the balance sheets of the two companies are combined line by line without a tax impact. Only allowed under certain circumstances.
Private Placement Memorandum (PPM)
is a legal document stating the objectives, risks and terms of investment involved with a private placement. Often includes; financial statements, management biographies, detailed business description, etc. PPM's provide buyers with information to protect the sellers from the liability associated with selling unregistered securities. >
Private Equity Fund
is a fund that invests its money in private equity, often in attempts to gain control over companies in order to restructure the company. When the fund gains control of a company, they will usually take the company off the market if it isn't private already, go through a multi-year restructuring process, and then relist the company on the stock market.
is a financing method that relies on future project cash flows rather than on the financial qualifications of the borrower. Project financing is usually structured as non-recourse or limited recourse financing where the project assets along with any revenue producing contracts serve as the primary collateral for the financing. Project financing is especially suited for building, expansion, or acquisition of capital-intensive industrial or infrastructure projects.
is an accounting method used in any merger that is not treated as a pooling of interests. The purchasing company treats the acquired as an investment, adding the acquired assets to its own balance sheet, and recording any premium paid above market price as goodwill, to be charged against future earnings.
is a loan that is acquired to purchase something. Car loans and home loans are considered to be purchase loans. Purchase loans are usually repaid over a designated point of time and are issued with some sort of fixed or variable interest rate. "Becky and Tom applied for a purchase loan, so that they could purchase the Mercedes Benz they always dreamed of owning."
is a legal agreement created by the courts between two parties who did not have a previous obligation to each other. A normal contract requires two parties to consent to mutually agreeable terms. Under a quasi contract, neither party is originally intended to create an agreement, but judge can impose an arrangement to rectify an occurrence of unjust enrichment.
is debt taken on by a company that has some traits of equity such as having flexible repayment options or being unsecured that have equity-like qualities without conferring ownership rights to the investor. The lender takes a non-stock financial stake in an organization in return for providing the capital for the development of a particular initiative with the return typically linked to the financial success of the venture. Learn More
is the act of providing a secondary discount in addition to a primary discount or process of discounting commercial paper for a second time. This type of action is often used by central banks to stimulate liquidity in the markets.
Revenue Participation Agreement (RPA)
is debt taken on by a company that has some traits of equity such as having flexible repayment options or being unsecured that have equity-like qualities without conferring ownership rights to the investor. The lender takes a non-stock financial stake in an organization in return for providing the capital for the development of a particular initiative with the return typically linked to the financial success of the venture.
Sale and Leaseback is an arrangement in which one party sells a property to a buyer and the buyer immediately leases the property back to the seller. This arrangement allows the initial buyer to make full use of the asset while not having capital tied up in the asset. Leasebacks sometimes provide tax benefits. Also called leaseback.
SBA (Small Business Administration)
is a Federal agency that makes loans to small businesses. In most cases, the agency itself does not grant the loans, but rather guarantees the loans from other lenders. The majority of loans provided by the Small Business Agency are to allow the small business to take out loans with longer repayment periods, or with less strict requirements than traditional loans. Since the agency was created in 1953 as part of the Small Business Act, it has helped approximately 20 million businesses. Along with providing loans, the agency also engages in other activities, such as helping businesses affected by natural disasters, running a venture capital program, and educating businesses on various issues.
SEC (Securities and Exchange Commission)
is the primary federal regulatory agency for the securities industry, whose responsibility is to promote full disclosure and to protect investors against fraudulent and manipulative practices in the securities markets. The Securities and Exchange Commission enforces, among other acts, the Securities Act of 1933, the Securities Exchange Act of 1934, the Trust Indenture Act of 1939, the Investment Company Act of 1940 and the Investment Advisers Act. Also see 'Securities'.
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is backed or secured by collateral to reduce the risk associated with lending
Securitization is the process of aggregating similar instruments, such as loans or mortgages, into a negotiable security.
Security is an investment instrument, other than an insurance policy or fixed annuity, issued by a corporation, government, or other organization which offers evidence of debt or equity, or property which is pledged as collateral for a loan.
Securities Exchange Act of 1934: "Any note, stock, treasury stock, bond, debenture, certificate of interest or participation in any profit-sharing agreement or in any oil, gas, or other mineral royalty or lease, any collateral trust certificate, preorganization certificate or subscription, transferable share, investment contract, voting-trust certificate, certificate of deposit, for a security, any put, call, straddle, option, or privilege on any security, certificate of deposit, or group or index of securities (including any interest therein or based on the value thereof), or any put, call, straddle, option, or privilege entered into on a national securities exchange relating to foreign currency, or in general, any instrument commonly known as a 'security'; or any certificate of interest or participation in, temporary or interim certificate for, receipt for, or warrant or right to subscribe to or purchase, any of the foregoing; but shall not include currency or any note, draft, bill of exchange, or banker's acceptance which has a maturity at the time of issuance of not exceeding nine months, exclusive of days of grace, or any renewal thereof the maturity of which is likewise limited."
Security (Stock) Loan is the loaning a stock, derivative, or other security to an investor or firm.
Seed Capital is the initial capital used to start a business often from the company founders' personal assets or from friends and family.
Small And Midsize Enterprises (SME) is a business that maintains revenues or a number of employees below a certain standard. Every country has its own definition of what is considered a small and medium-sized enterprise. In the United States, there is no legal identity.
Stock is a security that signifies ownership in a corporation and represents a claim on part of the corporation's assets and earnings. Two main types of stock are common and preferred. Common usually entitles the owner to vote at shareholders' meetings and to receive dividends. Preferred generally does not have voting rights, but has a higher claim on assets and earnings than the common shares.
Securities (Stock) Loan is the loan of securities by one broker to another, such as to cover a customer short sale. Also called securities loan.
Trade Financing describes the management of money, banking, credit, investments and assets for international trade transactions.
Unregulated Investment is an asset or item that is purchased with the hope that it will generate income or appreciate in the future that is not subject to government regulations. i.e. SEC regulation of stock transactions, etc.
Venture Capital Fund
is a pooled investment that uses the money from third-party investors, such as investment banks or wealthy investors