Finance Definitions
"Understanding Terms"
Useful Financial Definitions
- Business credit lines: A revolving line of credit that businesses can use to fund expenses.
- Unsecured loans: Loans that don’t require collateral to secure the funds.
- SBA loans: Small Business Administration-backed loans that provide funding to small businesses.
- Startup consulting: Expert advice on how to structure, fund, and grow a new business.
- Profit generation: Strategies to help businesses generate revenue and increase profitability.
- Business funding: Financial support provided to help a business start or grow.
- Working capital: The funds a business uses for its day-to-day operations.
- Revenue-based financing: A type of funding where repayment is based on the business’s revenue.
- No personal guarantee loans: Loans that don’t require the business owner to personally guarantee repayment.
- Business growth strategy: A detailed plan designed to help a company expand its operations.
- Equipment financing: Loans or leases to purchase business equipment.
- Credit score requirements: The minimum credit score needed to qualify for specific financing.
- Loan terms: The conditions and repayment terms agreed upon by the lender and borrower.
- Fixed interest rates: Interest rates that remain the same for the duration of the loan.
- Variable interest rates: Interest rates that fluctuate over the loan period based on market conditions.
- Line of credit: A flexible loan that allows a borrower to draw funds as needed, up to a set limit.
- Invoice financing: A way for businesses to borrow money against their outstanding invoices.
- Bridge loans: Short-term loans used to cover temporary cash flow needs.
- Merchant cash advance: A lump sum payment in exchange for a percentage of future sales.
- Debt consolidation: Combining multiple debts into one loan with a single payment.
- Equity financing: Raising capital by selling shares of the company.
- Private investors: Individuals or firms that invest capital in businesses in exchange for ownership or repayment.
- Angel investors: High-net-worth individuals who provide capital to startups in exchange for equity.
- Venture capital: Funding provided to early-stage, high-potential companies in exchange for equity.
- Collateral: Assets pledged by a borrower to secure a loan.
- Cash flow management: The process of tracking and optimizing cash coming into and going out of a business.
- Loan application process: The steps a business must take to apply for funding.
- Loan underwriting: The process by which lenders evaluate the risk of lending to a business.
- Pre-approval: The initial stage in a loan process where a lender evaluates the borrower’s creditworthiness.
- Term loan: A loan with a set repayment schedule and a fixed or variable interest rate.
- Microloans: Small loans designed to support startups and small businesses.
- Invoice factoring: Selling unpaid invoices to a third party in exchange for immediate cash.
- Alternative lenders: Non-bank lenders who provide financing to businesses.
- Creditworthiness: A measure of a borrower’s ability to repay a loan.
- FICO score: A credit score used to evaluate credit risk.
- Loan repayment schedule: The timeline and amount of payments required to repay a loan.
- Business expansion loans: Loans designed to help businesses grow by adding new locations or capabilities.
- Start-up loans: Loans specifically designed to help new businesses get off the ground.
- Investment capital: Funds provided by investors to help grow a business in exchange for equity.
- Grants for small businesses: Non-repayable funds provided to businesses to help them grow.
- Business development strategy: A plan designed to grow a business by attracting new customers and increasing revenue.
- Risk assessment: The process of evaluating potential risks to a business or investment.
- Debt-to-income ratio: A metric used by lenders to evaluate a business’s ability to repay loans.
- Credit line utilization: The amount of credit a business has used compared to its total credit limit.
- Financial forecasting: The process of predicting future revenue, expenses, and profits.
- Revenue streams: The sources from which a business earns its money.
- Operational efficiency: How well a business uses its resources to generate profits.
- Lender requirements: The criteria a lender uses to determine whether to approve a loan.
- Balance sheet: A financial statement that shows a business’s assets, liabilities, and equity.
- Profit and loss statement: A financial statement that summarizes revenue, costs, and expenses.
- Business valuation: The process of determining the value of a business.
- Business plan: A detailed document that outlines a business’s strategy, goals, and financial projections.
- Financial projections: Estimates of a business’s future revenue and expenses.
- Break-even analysis: A calculation to determine when a business will be able to cover its expenses with its revenue.
- Leverage: Using borrowed capital to increase the potential return on an investment.
- Debt restructuring: The process of renegotiating the terms of a loan to make it easier for the borrower to repay.
- Interest rates: The cost of borrowing money, expressed as a percentage.
- Principal amount: The original sum of money borrowed in a loan.
- Default: Failure to repay a loan according to the agreed terms.
- Late fees: Additional charges imposed when loan payments are not made on time.
- Early repayment penalties: Fees charged for paying off a loan before the agreed repayment period ends.
- Credit line increase: The process of raising the maximum amount of credit available to a borrower.
- Loan origination fee: A fee charged by a lender for processing a new loan.
- Debt financing: Raising capital by borrowing money that must be repaid with interest.
- Equity investment: Selling shares of a business to raise capital.
- Revenue sharing: A financing model where investors or lenders receive a portion of the business’s revenue.
- Convertible debt: A type of loan that can be converted into equity in the company.
- Due diligence: The process of thoroughly investigating a business before investing or lending.
- Financial statements: Reports that show a business’s financial performance, including income statements, balance sheets, and cash flow statements.
- Accounts receivable financing: Using unpaid invoices as collateral to secure a loan.
- Lease financing: Funding provided to businesses to lease equipment or property.
- Crowdfunding: Raising capital through small contributions from a large number of people, typically online.
- Peer-to-peer lending: A form of lending where individuals borrow money from other individuals without using a traditional financial institution.
- Capital expenditure: Money spent by a business to acquire, maintain, or upgrade physical assets.
- Liquidity: A business’s ability to meet its short-term financial obligations.
- Loan forgiveness: The cancellation of all or part of a loan, typically in exchange for fulfilling certain conditions.
- Interest-only loans: Loans where the borrower only pays the interest for a set period before paying down the principal.
- Balloon payment: A large, lump-sum payment that is due at the end of a loan term.
- Bridge financing: Temporary funding used to cover short-term cash flow needs.
- Growth equity: Investment capital used to accelerate the growth of a business.
- Operating lease: A lease where the lessee only rents the asset and does not take ownership.
- Capital lease: A lease where the lessee assumes ownership of the asset at the end of the lease term.
- Accrued interest: Interest that has accumulated on a loan but has not yet been paid.
- Cash flow forecast: A projection of the amount of cash a business expects to receive and spend over a future period.
- Credit insurance: Insurance that protects businesses against the risk of non-payment by customers.
- Invoice discounting: A way for businesses to borrow money against their outstanding invoices.
- Trade credit: Credit extended to a business by its suppliers.
- Working capital loan: A loan used to finance a business’s day-to-day operations.
- Capital structure: The mix of debt and equity a business uses to finance its operations.
- Secured loan: A loan that is backed by collateral, such as property or equipment.
- Factoring agreement: A financial agreement where a business sells its receivables to a third party to improve cash flow.
- Credit limit: The maximum amount of credit a lender will extend to a borrower.
- Debt-to-equity ratio: A measure of a company’s financial leverage, calculated by dividing its total liabilities by its shareholder equity.
- Cash reserve: Funds set aside by a business for unexpected expenses or future investments.
- Inventory financing: A loan secured by a business’s inventory.
- Non-recourse loan: A loan where the lender’s only option for repayment is to seize the collateral pledged by the borrower.
- Overdraft protection: A service provided by banks to cover shortfalls in a business’s checking account.
- Credit terms: The conditions under which a business extends credit to its customers.
- Bankruptcy protection: Legal protection granted to businesses that are unable to meet their financial obligations.
- Personal guarantees: A personal commitment from the borrower to repay the loan if the business cannot.