- The recording, classifying, summarizing and interpreting
in a significant manner and in terms of money, transactions and events of a financial
Payable - Trade accounts of businesses representing obligations to pay
for goods and services received
Receivable - Trade accounts of businesses representing moneys due for goods
sold or services rendered evidenced by notes, statements, invoices or other written evidence of a present
Acid Ratio - Current assets less inventories
divided by current liabilities. Also known as "Quick Ratio."
Acquisition - The acquiring of supplies or
services by the federal government with appropriated funds through purchase or
Affiliates - Business concerns, organizations,
or individuals that control each other or that are controlled by a third party. Control may include shared
management or ownership; common use of facilities, equipment, and employees; or family interest. The
calculation of a firm's size includes the employees or receipts of all affiliates. Affiliation with another
business concern is based on the power to control, whether exercised or not. Such factors as common
ownership, common management and identity of interest (often found in members of the same family), among
others, are indicators of affiliation. Power to control exists when a party or parties have 50 percent or
more ownership. It may also exist with considerably less than 50 percent ownership by contractual arrangement
or when one or more parties own a large share compared to other parties. The affiliated business concerns
need not be in the same line of business.
Amortization - Gradual reduction of term debt by
periodic payment sufficient to pay current interest and to eliminate the principal at
Ancillary Bond - A type of surety bond where the
surety company guarantees other factors which are incidental and essential to the performance of a
Annual Percentage Rate
-The cost of credit as a yearly
Annual Receipts - Receipts are averaged over a
firm's latest 3 completed fiscal years to determine its average annual receipts. "Receipts" means the firm's
gross or total income, plus cost of goods sold, as defined by or reported on the firm's Federal Income Tax
return. The term does not include, however, net capital gains or losses, nor taxes collected for and remitted
to a taxing authority if included in gross or total income. The firm may not deduct income taxes, property
taxes, cost of materials or funds paid to subcontractors. Travel, real estate and advertising agents,
providers of conference management services, freight forwarders and customs brokers may deduct amounts they
collect on behalf of another. If a firm has not been in business for 3 years, the average weekly receipts for
the number of weeks the firm has been in business is multiplied by 52 to determine its average annual
Appraised Value - The value placed on an item,
product or business by an appraiser, recognized for experience in a particular
Assets - The entire property of a person,
association, corporation, or estate applicable or subject to the payment of
Asset-Based Lending -Financing secured by pledging
assets (inventory, receivables, or collateral other than real estate.
Assumptions - The act of assuming/undertaking
another's debts or obligations.
Auction - A public sale of goods to the
Balance Sheet - Financial statement listing a
company's assets, liabilities, and equity on a specific date.
Bid Bond - A type of surety bond wherein the
surety company guarantees the bidder will enter into a contract and furnish the required payment and
Book Value - The value of an item or property
at a specific time after deducting depreciation from original cost.
Business Concern - A business concern eligible for
assistance as a small business is a business entity organized for profit, with a place of business located in
the United States, and which operates primarily within the United States or makes a significant contribution
to the US economy through payment of taxes or use of American products, materials, or
Capital - 1. Assets less liabilities,
representing the ownership interest in a business; 2. A stock of accumulated goods, especially at a specified
time and in contrast to income received during a specified time period; 3. Accumulated goods devoted to the
production of goods; 4. Accumulated possessions calculated to bring income.
Capitalization - The basic resources of a company
including the owner's equity, retained earnings and fixed assets. One of the "Five C's" of
Cash Flow - The movement of money into and
out of your business.
Cash Flow Statement - An accounting presentation
showing how much of the cash generated by the business remains after both expenses (including interest) and
principal repayment on financing are paid. A projected cash flow statement indicates whether the business
will have cash to pay its expenses, loans, and make a profit. Cash flows can be calculated for any given
period of time, normally done on a monthly basis. Also, one of the Five "Cs" evaluated in determining a loan
Company - The 504 Certified Development
Company (CDC) Program provides growing businesses with long-term, fixed-rate financing for major fixed
assets, such as land and buildings. A Certified Development Company is a nonprofit corporation set up to
contribute to the economic development of its community. CDCs work with the SBA and private-sector lenders to
provide financing to small businesses. There are about 270 CDCs nationwide. Each CDC covers a specific
Certified Lender Program
- CLP- The most active and expert
lenders qualify for the SBA's streamlined lending programs. Under these programs, lenders are delegated
partial or full authority to approve loans, which results in faster service from SBA. Certified lenders are
those who have been heavily involved in regular SBA loan-guaranty processing and have met certain other
criteria. They receive a partial delegation of authority and are given a three-day turnaround by the SBA on
their applications (they may also use regular SBA loan processing). Certified lenders account for nearly a
third of all SBA business loan guaranties.
Character - The degree to which a potential
borrower feels a moral obligation to repay debts as evidenced by the borrower's credit and payment history.
One of the "Five Cs" used in a lending officer's determination of a particular loan applicant's
Collateral - Something of value--securities,
evidence of deposit or other property--pledged to support the repayment of an obligation. Also one of the
Five "Cs" used in determining a loan applicant's credit worthiness.
Collateral Document - A legal document covering the
item(s) pledged as collateral on a loan, i.e., note, mortgages, assignment,
Collateral Value -Value of pledged asset(s) as
determined by an appraisal or other methods of valuation. Lenders often discount collateral by a certain
Commercial Paper - Unsecured promissory notes of
Commitment -When a lender agrees to lend a
specific amount, with rates, terms, conditions and covenants, in writing.
Concentration -When a lender’s loan portfolio is
heavy in a particular industry or type of business.
Conditions - External factors such as
government regulation, competition, industry trends, national economic trends, that can affect the success of
a business. One of the "Five Cs" of credit.
Contingent Liability - A potential obligation that may
be incurred dependent upon the occurrence of a future event. Two examples are: (1) the liability of an
endorser or guarantor of a note if the primary borrower fails to pay as agreed and (2) the liability that
would be incurred if a pending lawsuit is resolved in the other party's
Cost Of Good Sold -Cost to make a product, including
materials, labor, and related overhead.
Covenant - A prescription for action in a
Covenant Not To Compete
- The agreement by the seller of a
business, not to enter into competition with the buyer of the business within a specific area for a specific
period of time.
Credit - Time allowed for the payment of
goods or services sold on trust as well as confidence in the buyer's ability and intention to fulfill their
Current Assets -Assets that can be converted into cash in one year. Non-Current
Assets take one year or more.
Current Liabilities -Money you agreed to repay by
signing notes, or by being a co-maker or guarantor of loans. Lenders want to know how much money you are
liable for if the loan results in legal actions or contested taxes.
Current Ratio - The ratio of current assets to
liabilities. Also called "quick ratio."
Debenture - Debt instrument evidencing the
holder's right to receive interest and principal installments from the named obligor. Applies to all forms of
unsecured, long-term debt evidenced by a certificate of debt.
Debt To Total Assets Ratio
- Total debt divided by total
Debt Capital - Business financing that normally
requires periodic interest payments and repayment of the principal within a specified
Debt Financing - The provision of long term loans
to small business concerns in exchange for debt securities or a note.
Deed Of Trust - A document under seal which, when
delivered, transfers a present interest in property. May be held as
Defaults - The nonpayment of principal
and/or interest on the due date as provided by the terms and conditions of the
Deferred Loan - Loans whose principal and or
interest installments are postponed for a specified period of time.
Depreciation -Except for land, asses wear out.
The value goes down and can be deducted from your business as an expense. Present values of assets are shown
as original cost less depreciation. Market value, or the price you could sell it for, could differ from this
- An accounting procedure for
determining the amount of value left in a piece of equipment.
Discount Interest Rate
- One in which the amount of interest is deducted from the face
value of the loan with the borrower receiving the remainder.
Divestiture - Change of ownership and/or
control of a business from a majority (non-disadvantaged) to disadvantaged
Easement - A right or privilege that a
person may have on another's land, as the right of a way or ingress or
Equity - An accounting term used to
describe the net investment of owners or stockholders in a business. Under the accounting equation, equity
also represents the result of assets less liabilities.
Equity Financing- The provision of funds for
capital or operating expenses in exchange for capital stock, stock purchase warrants and options in the
business financed, without any guaranteed return, but with the opportunity to share in the company's profits.
Equity financing includes long-term subordinated securities containing stock options and/or
Equity Partnership - A limited partnership arrangement
for providing start-up and seed capital to businesses.
Escrow Account - Funds placed in trust with a
third party, by a borrower for a specific purpose and to be delivered to the borrower only upon the
fulfillment of certain conditions.
Fair Market Value - What a qualified buyer will pay
for goods, services, or property.
Financial Ratios - Measures of capital, including
debt to asset, current, and debt to worth. See individual definitions for "acid," "current," "quick"
Financial Reports - Reports commonly required from
applicants request for financial assistance, e.g.: Balance Sheet -A report of the status of a firm's assets,
liabilities and owner's equity at a given time.
Financial Statement -Reports showing the financial
condition of a business on a particular date or for a period of time (such as one year). Lenders review the
Balance Sheets and Income Statements.
Fixed Assets - Equipment, buildings, etc., which
are purchased and used for long-term purposes.
Fixed Costs - Costs of doing business such as
rent, utilities, depreciation, taxes, etc., that remain generally the same regardless of the amount of sales
of goods or services.
Foreclosure - The act by the mortgagee or
trustee upon default, in the payment of interest or principal of a mortgage of enforcing payment of the debt
by selling the underlying security.
Franchising - A continuing relationship in
which the franchisor provides a licensed privilege to the franchisee to do business, and offers assistance in
organizing, training, merchandising, marketing and managing in return for a consideration. Franchising is a
form of business by which the owner (franchisor) of a product, service or method obtains distribution through
affiliated dealers(franchisees). The product, method or service being marketed is usually identified by the
franchisor's brand name, and the holder of the privilege (franchisee) is often given exclusive access to a
defined geographical area.
Goodwill - An intangible asset of a business
that relates to a favorable relationship with customers, and excess earning
Gross Profit -Gross sales less cost of goods
sold. This is your mark-up. Also called gross margin.
Gross Sales -Revenue or income from sales before returns and
Guaranteed Loan - A loan made and serviced by a lending institution under
agreement that a governmental agency will purchase the guaranteed portion if the borrower
Guarantor -A guarantor has the same
responsibilities as a co-signer. If the loan goes into default and is not paid by the signer(s) of the loan,
the guarantor is responsible.
Guaranty - Promise by an individual or
organization to repay a loan in the event of default.
Income Statement - Financial statement showing a
company's sales, expense and net income or loss for a specific period of
Lease - A contract between the owner
(lessor) and the tenant (lessee) stating the conditions under which the tenant may occupy or use real estate
or equipment. Terms usually include a specific period of time and a predetermined
- Improving your leased business
location, at your own expense.
Lessee - The user of equipment or property
Letter Of Credit
-(L/C)- Payments to a third party by the
lender, on the owner’s behalf.
Liabillity - Debt owed by the company such as
bank loans or accounts payable.
Lien - A charge upon or security
interest in real or personal property maintained to ensure the satisfaction of a debt or duty ordinarily
arising by operation of law.
Line Of Credit - A short-term loan, usually less
than one year.
Liquid Assets - Cash, checks and
easily-convertible securities available to meet immediate and emergency
Liquidation - The disposal, at maximum prices,
of the collateral securing a loan, and the voluntary and enforced collection of the remaining loan balance
from the obligators and/or guarantors.
Liquidation Value - The net value realizable in the
sale (ordinarily a forced sale) of a business or a particular asset.
-Expenses, loans, and payables due
after one year.
Loss Rate - A rate developed by comparing the
ratio of total loans charged off to the total loans disbursed from inception of the program to the present
Loss Reserve Adjustment Rate
- A reserve rate based upon the
ratio of the aggregate net chargeoffs (chargeoffs less recoveries) for the most recent five years to the
total average loans outstanding for the comparable 5-year period.
Market Value - What a willing buyer will pay for
goods, services, a property or a business.
Net Worth - Property owned (assets), minus debts and obligations owed
(liabilities), is the owner's equity (net worth).
Notes And Accounts Receivable
- A secured or unsecured receivable evidenced by a note or
open account arising from activities involving liquidation and disposal of loan
Performance Bond - A type of surety bond where the
surety company guarantees the contractor will fulfill the contract in accordance with its
Preferred Lender Program
-PLP- The most active and expert
lenders qualify for the SBA's streamlined lending programs. Under these programs, lenders are delegated
partial or full authority to approve loans, which results in faster service from SBA. Preferred lenders are
chosen from among the SBA's best lenders and enjoy full delegation of lending authority in exchange for a
lower rate of guaranty. This lending authority must be renewed at least every two years, and the lender's
portfolio is examined by the SBA periodically. Preferred loans account for more than 10 percent of SBA
Prime Rate - Interest rate which is charged
business borrowers having the highest credit ratings, for short term borrowing. As published daily in the
Wall Street Journal, it is the basis for rates to other lenders.
Pro Forma -Forecasting future income, expenses, or cash flow with
Retained Earnings -Net profits accumulated through the company’s life and reported
in the net worth or equity section of the balance sheet. Note: Can be negative if losses
Return On Investment - The amount of profit (return)
based on the amount of resources (funds) used to produce it. Also, the ability of a given investment to earn
a return for its use.
SBAExpress - Makes it easier and faster for
lenders to provide small business loans of $150,000 or less; allows lenders to use their own forms and
processes to approve loans guaranteed by the U.S. Small Business Administration; provides a rapid response
from the SBA - within 36 hours of receiving your complete application; lets lenders take advantage of
electronic loan processing; and helps lenders provide smaller revolving
SBA Low Doc - streamlines the making of small business loans. The maximum
loan-$150,000. Calls for a response from the SBA within 36 hours of receiving a complete application.
Guaranty percent follows 7(a) policy.
SBIC-Small Business Investment Company-
Licensed by the Small Business Administration, SBICs are privately owned and managed investment firms. They
are participants in a vital partnership between government and the private sector economy. With their own
capital and with funds borrowed at favorable rates through the Federal Government, SBICs provide venture
capital to small independent businesses, both new and already established.
Secondary Market - Entities who purchase an interest
in a loan from an original lender, such as banks, institutional investors, insurance companies, credit unions
and pension funds.
Secured Loan -Loan secured by collateral (which will be liquidated if the
borrower defaults on the loan).
Surety Bond - A three-way agreement between a surety company, a
contractor and the project owner. If the contractor fails to comply with the contract, the surety assumes
responsibility and ensures that the project is completed. By law, prime contractors to the federal government
must post surety bonds on federal construction projects valued at $25,000 or more. Many state, county, city
and private-sector projects require bonding as well.
T-Bills -Treasury Bills
- Short term obligations of the
Tangible Asset -Real property such as buildings
and machinery. Trademarks, goodwill, or accounts receivable are not considered tangible
Term -A loan’s maturity, stated in
months or years.
Term Loan -Loan, given in one lump sum, is
provided at the closing. Repayment is monthly.
Usury - Interest which exceeds the legal rate charged to a borrower
for the use of money.
Venture Capital - Money used to support new or unusual commercial undertakings;
equity, risk or speculative capital. This funding is provided to new or existing firms that exhibit
above-average growth rates, a significant potential for market expansion and the need for additional
financing for business maintenance or expansion.
Working Capital - Cash and short-term assets that can be used for
current needs -- bills, etc.