A B C D E F G H I J K L M N O P Q R S T U V W X Y Z
SBA SECTION

A

Accounts Receivable Loan (debt)Annuity

A loan that revolves around a business' accounts receivable balance. As receivables grow the loan, availability usually grows accordingly.

A form of contract sold by life insurance companies that guarantees a fixed or variable payment to the buyer at some future time, usually retirement. A FIXED Annuity pays out in regular (fixed) installments varying only with the payout method elected. A VARIABLE Annuity pays out an amount that varies with the value of the account.

Asset

Anything owned that is convertible into cash. Usually divided into two broad classes: 1) Real assets/property;  computer, equipment, inventory, etc., 2) Financial assets/money; cash, bank account, mutual funds, etc.

B

Bankers Acceptance

Short terms financing that are a cost effective vehicle for domestic and international commerce.

Banks, Savings, Loans and other Financial Institutions

Commercial banks and similar institutions do the majority of business financing. Banks use their depositors’ money to make loans and must repay their depositors.

Bond (debt security)

A negotiable, long-term debt instrument that carries certain obligations (including the payment of interest and repayment of principal) on the part of the issuer. Common issuers are the Federal government (Treasuries), State and Local governments (Municipals) and Businesses (Corporate).

Bond, Discounted

Also called Zero-Coupon bonds, no periodic interest payments. Instead, the bond is sold at some price below (discounted) its face value and returns full face value at maturity. Because of the IRS's treatment, this type bond is best used in tax deferred accounts such as IRA's.

Bridge Financing (debt and/or equity)

Bridge financing is needed at times when a company plans to go public. Often bridge financing is structured so that it can be repaid from the proceeds of the public underwriting. It may also involve restructuring of major stockholder positions through secondary transactions. Restructuring is undertaken if there are early investors who want to reduce or liquidate their positions, or if management has changed and the stock holdings of the former management, their relatives and associates are being bought out to relieve a potential over supply of stock when public.

Budget

An estimate of income and expenses for a specified period.

C

Capital

Wealth, net worth in money and/or property. Any form of wealth employed or capable of being employed in the production of more wealth. A subset of Assets.

Capital Structure

The post investment financial structure must fit the particular capital requirements of the company that will provide sufficient long-term capital growth.

Cash Flow- After Debt Service

The sum remaining after subtracting debt service (principal and interest) from net operating income.

Cash Flow- Net Operating

Net operating cash is the amount of money remaining after all direct expenses are deducted, such as maintenance, property taxes, utilities, management, etc. but not including debt service, depreciation, income taxes and capital improvements.

Commercial Lines of Credit

Working capital lines of credit are provided on a revolving basis and are annually renewable. These lines of credit are extended on a formula basis with advances made against selected inventory.

D

Debt

Debt consists of long or short-term loans that may be secured, unsecured, or partially secured, fixed or variable rate, etc. There are many variations of debt, and a whole list of terms and conditions that may be applicable.

Dividend

Distribution of earnings to shareholders, the amount is decided by the company's board of directors and is usually paid quarterly. Dividends must be declared as income in the year they are received.

Dollar Cost Averaging

A method of purchasing assets by investing a fixed amount of dollars at set intervals (such as $100 per month). This method automatically buys more of the asset when the prices are down.

E

Early Stage Financing (debt and/or equity)

Provided to companies that have expended their initial capital and require funds to initiate full-scale manufacturing and sales. May be debt or equity.

Earnings

Corporate profit remaining after paying taxes and bondholder interest.

Employee Stock Ownership Plan Loans

Financing to assist in the transfer of ownership to the employees.

Equipment Financing

Capital to be used for acquisition of equipment, operation or manufacturing.

Equity

Equity is not a loan, but an investment made by an individual, group, or an organization. Equity investments usually require the relinquishment of a portion of your company's stock and/or control. Seeking equity investments has its advantages over debt. Sometimes investors bring necessary talent to the team to help drive the company to a higher level of success. Offering equity in your company, while often times a more challenging endeavor, requires one to perform the necessary homework up front to ensure the probability of success to both the business owner and the investor's chances of seeing a return on their investment(s).

Equity Creation

The completed value of a project should ordinarily exceed its total cost, since risk and other uncertainties are either clear, or eliminated. The value of a new building may be calculated by using market approach (what other similar property sell for) income approach (capitalization of net income) or, in the case of older or discounted price properties, cost of replacement in today's cost market. If an appraisal has been done on the project based upon (future) completed value, use this value.

Expansion Capital

Capital used for (a) the expansion of an existing business, or (b) enlargement of an existing structure or project.

Exit Strategy

A business plan should include a time frame and a mechanism for realization of shareholder value. Examples of exit strategies include the sale of the company, re-capitalization, or an IPO.

F

Factoring of Accounts Receivable - Consumer Receivables

Consumer Receivable factoring is the sale of accounts receivables (where services were delivered or goods were sold to consumers) for cash at a discount, without credit insurance. The factor does not insure credit or performance risk. Therefore, if the customer does not pay on an invoice factored, the factor charges the invoice back to the company. Commonly serves as a line of credit for startups or emerging companies not qualifying for traditional working capital lines of credit.

Factoring of Accounts Receivable - Full Recourse

Full-Recourse factoring is the sale of accounts receivables for cash at a discount, without credit insurance. The factor does not insure credit or performance risk. Therefore, if the customer does not pay on an invoice factored, the factor charges the invoice back to the company. Commonly serves as a line of credit for startups or emerging companies not qualifying for traditional working capital lines of credit.

Factoring of Accounts Receivable - Maturity

Maturity factoring allows companies to establish predictable cash flow levels at a relatively low cost by offering what amounts to a slow payment insurance policy. The maturity factor guarantees payment of a company's accounts receivable such that if collections slow, the factor will advance funds on unpaid invoices for which they collect a fee (typically 1% of the face value of the invoice).

Factoring of Accounts Receivable - Non Recourse

Non-Recourse factoring is the sale of accounts receivables for cash at a discount, where the factor insures the credit risk associated with your customer's ability to pay, but does not insure the performance risk in your ability to deliver a satisfactory service or product. Commonly serves as a line of credit for startups or emerging companies not qualifying for traditional working capital lines of credit.

Financial Lease

A long-term lease that extends over most of the useful life of the asset. 

Financial Leverage

The use of debt financing to complement equity financing.

Financial Structure Ratio

Invested capital (or net assets) divided by owners' equity. A measure of financial leverage based on balance sheet data.

Firms Cost of Capital

The return expected by investors for the capital they supply to fund all the assets acquired and managed by the firm.

First Stage Funding (debt and/or equity)

Provided to companies that have expended their initial capital and require funds to initiate full-scale manufacturing and sales. May be debt or equity.

Fixed Asset Turnover or Turns

Sales divided by fixed assets. A measure of the efficiency of fixed assests management. 

401(k) Plan

An employer sponsored, tax deferred, retirement plan which uses pre-tax contributions from an employees regular compensation to invest for that employee's in a number of possible financial instruments. Many companies that offer these plans will MATCH a portion or all of the employees contributions with cash or securities; this is, in essence, free money fully added to the employees account usually after some set period (vesting).

403(b) Plan

A tax deferred retirement plan very much like the 401(k) [above], with the main difference being that the employer is a non-profit organization (school, church, etc.).

Franchising

Companies transferring the right to conduct business under its trademark.

G

Goodwill

The difference between the (higher) price at which a firm has been acquired and either its reported net book value or its estimated fair value.

Gross Profit

The difference between the firm's net sales and its cost of goods sold.

H

Historical Multiples

Multiples calculated using past financial data. Same as trailing multiples. Used to value a firm.

Horizontal Merger

Two firms in the same sector pooling their resources.

Hurdle Rate

An investment's cost of capital when used in comparison with the investment's internal rate of return. Same as minimum required rate of return.

I

Inflation

A sustained rise in the prices of goods and/or services. Two common measures of the Inflation Rate are the Consumer Price Index and the Producer Price Index.

Income Statement

Financial statement reporting information about the firm's activities that result in changes in the value of owner' equity during a period of time, obtained by deducting from revenues the corresponding expenses incurred during that period of time.

Incremental Cash Flow

The difference between the firm's expected cash flow if the investment is made and its expected cash flows if the investments not undertaken.

Initial Public Offering (IPO)

When a firm sells equity to the public for the first time.

Intangible Assets

Assets such as goodwill, patents, trademarks, and copyrights.

Interest - Rate Risk

Risk arising from unexpected changes in the level of interest rates that affect the firm's future cost of debt financing.

Internal Rate of Return (IRR)

Discount rate at which the present value of the future cash flows of an investment equal the cost of the investment. It is found by a process of trial and error; when the net present values of cash outflows (the cost of the investment) and cash inflows (returns on the investment) equal zero, the rate of discount being used is the IRR. When IRR is greater than the required return-called the hurdle rate in capital budgeting-the investment is acceptable.

International Lines of Credit

Through letters of credit you can place the strength of the lender behind your company providing the international trading partners with additional confidence.

Inventories

Raw materials, work in process, and finished goods not yet sold, reported in the balance sheet as current assets.

Inventory Turn or Turnover

Cost of goods sold divided by ending inventories.

Invested Capital

The sum of cash and marketable securities, working capital requirement, and net assets. Equal to capital employed.

Investment

The use of capital to create more money. Usually includes the idea that safety of principal is important.

L

Last In, First-Out

Inventory valuation method that assigns to all units in inventory the cost of the unit purchased last.

Late Stage Financing

Capital used to finance an existing established business. Late Stage Financing may be used to gain market share, reduce debt or virtually any other need a company is looking to address.

Letters of Intent

A written indication of serious interest by a prospective tenant, but not a binding obligation.

Leveraged Buyout

Takeover of a company, using borrowed funds. Most often, the target company's assets serve as security for the loans taken out by the acquiring firm, which repays the loans out of cash flow of the acquired company. Management may use this technique to retain control by converting a company from public to private. A group of investors may also borrow from banks, using their own assets as collateral, to take over another firm. In almost all leverage buyouts, public shareholders receive a premium over the current market value for their shares.

Leveraged Lease

A financial lease in which the leasing company finances the purchase of the asset with a substantial level of debt, using the lease contract as collateral.

Liabilities

What a firm's shareholders collectively owe on the date of the balance sheet.

Licensing

Companies can license their product to distributors with established sales, thus avoiding the cost of building its own sales infrastructure.

Line of Credit

Lines of credit cover short-term operating expenses. A non binding arrangement in which a bank lends a firm a stated maximum amount of money over a fixed but renewable period of time, usually one year. In general, no fee is charged but a compensating balance is required.

Liquidation Value

Amount of cash that can be raised if various items that make up firm's assets are sold separately. Usually the minimum value of assets.

Liquidity (of a Firm)

The ability of a firm to meet short-term recurrent cash obligations.

Loan or Investment to Value Ratio

The amount of funding compared to the value of the project (50%, for example).

London Interbank Offering Rate (LIBOR)

The interest rate at which international banks lend U.S. dollars to one another.

Long-Term Financing

Equity plus long-term debt.

M

Management Buyout

Takeover of a company by its own management, using borrowed funds. Most often, the company's assets serve as security for the loans taken out by its management, which repays the loans out of cash flow of the company. Management may use this technique to retain control by converting a company from public to private. Management may also borrow from banks, using their own assets as collateral, to take over the company. In almost all leverage buyouts, public shareholders receive a premium over the current market value for their shares.

Market Capitalization

Market value of a firm's equity. Equal to its quoted price per share multiplied by the total number of shares the company has issued. Also referred to as market cap.

Master Lease (Debt)

A continuing lease arrangement whereby additional equipment can be added from time to time merely by describing that equipment in a new lease schedule executed by the parties. The original lease contract terms and conditions apply to all subsequent schedules. To be contrasted with a lease contract for a single transaction involving a specific piece of equipment, a Master Lease is essentially a line of credit to draw from over time in order to purchase equipment.

Maturity Date

The date on which the face value of a bond must be repaid. The date on which an option contract must be settled. For an option contract, the maturity date is the same as the expiration date.

Mezzanine Funding (combination debt/equity)

Is a hybrid between debt and equity. Secured by existing or to be acquired borrower assets it ranks below senior bank financing. The return to the lender is generated by a combination of interest income and equity in the borrower. Generally less expensive than equity and more flexible than senior bank financing, Mezzanine Debt is increasingly being sought by growth oriented companies to meet their capital needs.

Money Market Fund

A type of Mutual Fund that invests in commercial paper, bankers' acceptances, repurchase agreements, government securities, certificates of deposit, and other liquid and safe securities that pays money market rates of interest. Though these funds are not federally insured, like a bank account, there hasn't been a complete failure to date (there have been two failures, but, the shareholders were reimbursed in the first case and the second is still pending).

Mortgage

Mortgages are available for new construction, acquisition, and refinancing purposes. Term of loans is usually fully amortized over fifteen to thirty years.

Mortgage Bond/Loan

A medium- to long-term bond/loan backed by real estate.

Multiplies

Ratios used to value firms.

N

Net Assets

Cash plus working capital requirement plus net fixed assets. Also, total assets less operating liabilities. Same as invested capital. Not to be confused with net asset value.

Net Asset Value

The difference, at a particular date, between what a firm's shareholders collectively own, called assets, and what they owe, called liabilities. Same as net worth owners' equity, shareholders' funds. Not to be confused with net assets.

Net Book Value

The value at which a fixed asset is reported in the balance sheet.

Net Capital Expenditures

Cash Capital expenditures less cash raised from the sales of existing assets.

Net Fixed Assets

Long-term assets, such as equipment, machinery, and buildings, from which accumulated depreciation expenses have been deducted.

Net Operating Cash Flow

The net cash flow originating from the firm's operating activities during the period under consideration (cash inflows from operations minus cash outflows from operations).

Net Present Value (NPV)

The discounted value (at the weighted average cost of capital) of an investment's future stream of cash flows(net operating cash flows less net capital expenditures) less the initial cash outlay required to launch the investment. 

Net Present Value (NPV) Rule

If a business proposal has a positive net present value (NVP), it should be carried out because it will increase the firm's value by an amount equal to the proposal's NVP If a proposals NPV is negative, it should be rejected.

Net Profit Margin

Net profit margin divided by sales. A measure of profitability.

Nominal Cash Flows

Nominal cash flows measured in nominal terms, that is, including inflation.

Noncurrent Assets

Long-lived assets that are not expected to be turned into cash within a year. Same as long-term assets, fixed assets, or capital assets. It can be tangible or intangible assets as well as financial assets.

Noncurrent Liabilities

Obligations of a firm that are payable after more than one year.

Note

A debt security acknowledging a creditor relationship with the issuing firm and stipulating the conditions and terms under which the money was borrowed. Same as promissory notes.

O

Operating Cash-Earnings Multiple

Share price divided by earnings before interest, tax, depreciation, and amortization (EBITDA) per share; used to value a firm.

Operating Cycle

The sequence of operating activities that begins with the acquisition of raw materials and ends with the collection of cash for the sale of final goods.

Operating Expenses

Expenses related to operating activities, that is, cost of goods sold, selling, general and administrative  expenses, and depreciation expenses. Operating expenses exclude interest expenses, which are related to financing activities.

Operating Lease

A short-term lease for which the length of the contract is shorter than the useful life of the asset leased.

Operating Profit

Net sales less operating expenses.

Operating Profit Margin

Earnings before interest and tax (EBIT) divided by sales. A measure of profitability.

Optimal Capital Structure

The debt-to-equity ratio that maximizes the market value of the firm's assets. 

Owners' Equity

The difference, at a particular date, between what a firm's shareholders collectively own, called assests, and what they owe, called liabilities. Same as net asset value, net worth, shareholders' equity, and shareholders' funds.

P

Paid-In Capital in Excess of Par

The difference between the cumulative amount of cash that the firm received from shares issued up to the date of the balance sheet and the cash it would have received if those shares had been issued at par value.

Par Value

For a share of stock, an arbitrary fixed value set when shares are issued. For a bond, the fixed amount (face value) that has to be paid back to bondholders at the maturity date of the bond.

Payback Period

The number of periods (usually years) required for the sum of the project's expected cash flows to equal its initial cash outlay.

Preferred Stocks

A security that has a priority over common stock in the payment of dividends and a prior claim on the firm's assets in the event of liquidation, but has no voting rights.

Prepaid Expenses

Payments made by a firm for goods or services it will receive after the date of the balance sheet.

Present Value (PV)

The value of an expected future cash-flow stream discounted at a rate that reflects its risk. Same as discounted value.

Price-to-Earnings Ratio (PER or P/E Ratio)

Share price divided by the firm's earnings per share. Same as earnings multiple. Used to value a firm.

Private Placement

The issuance and sale of a firm's securities directly to financial institutions and qualified investors, thus bypassing the financial markets.

Profitably Index (PI)

The present value of an investment's expected cash-flow stream divided by the investment's initial cash outlay.

Property Plant and Equipment

Tangible assets such as land, buildings, machines, and furniture reported in the firm's balance sheet as fixed assets.

Provisions (for bad debt)

Provisions for possible uncollectiblity of accounts receivable. Same as allowance for bad debts.

Public Offering

The issuance and sale of a firm's securities to the public at large, not only to its existing shareholders. Same as general cash offering.

Purchases

Cost of goods sold plus change in inventories minus production costs.

Principal

Face amount of a debt security (Bond or Mortgage) on which interest is owed or earned. Investment Principal: basic amount invested, exclusive of earnings.

Q

Quick Ratio

Cash plus accounts receivable divided by current liabilities. Same as acid test. A measure of liquidity.

R

Raw Materials Inventory

The cost assigned to materials that have not yet entered the production process at the date of the balance sheet.

Real Estate Loans

Loans used to purchase or refinance owner-occupied property and buildings.

Recapitalization

Alteration of a corporation's Capital Structure, such as an exchange of bonds for stock, or of preferred stock for common stock, or of one type of bond for another. Bankruptcy is a common reason for recapitalization; debentures might be exchanged for Reorganiztion Bonds that pay interest only when earned, and other bonds might be exchanged for common shares. A healthy company might seek to improve its tax situation by replacing preferred stock with bonds to take advantage of the tax deductibility of interest, or it might seek to improve its credit rating by replacing bonds with stock.

Research and Development (debt and/or equity)

Scientific and marketing evolution of a new product or service. Once such a product has been created in a laboratory or other research setting, marketing specialists attempt to define the market for the product.

R & D Funding (Equity)

This is a tax advantaged partnership setup up to finance product development for startup as well as more mature companies. Investors secure tax write-offs for their investments as well as a later share of the profits if the product development is successful.

Return on Investment

The most common calculation used is Internal Rate of Return (IRR). A less sophisticated "snapshot" method is return on cost, calculated by dividing total cost by net operating income.

Reserves Residual Value (of an asset)

The accumulation of retained earnings since the creation of the firm.

The resale, or scrap, value of an asset. Same as salvage value.

Residual Value (of a Firm)

The estimated value that the firm will have at the end of a forecasting period, which is determined by the expected cash flows beyond the forecasting period.

Retained Earnings

The part of a firm's profit that owners decide to invest back into their company. 

Return on Assets (ROA)

The Earnings after tax (EAT) divided by total assets. A measure of profitability.

Return on Business Assets (ROBA)

Earnings before interest and tax (EBIT) divided by business assets (working capital requirement plus net fixed assets). A measure of operating profitability.

Return on Capital Employed (ROCE)

The net operating profit after tax (NOPAT or EBIT x (1-Tax rate)) divided by capital employed (equity plus debt capital) Same as return on net assets (RONA). Equal to return on invested capital (ROIC). Can also be measured before tax by replacing EBIT x (1-Tax rate) with EBIT. A measure of operating profitability.

Return on Equity (ROE)

Earnings after tax (EAT) divided by owners' equity. A measure of the firm's profitability to shareholders.  

Return on Invested Capital

Net operating profit after tax (NOPAT or EBIT x (1-Tax rate)) divided by invested capital (cash plus working capital requirement plus net fixed assets). Same as return on net assets (RONA). Equal to return on capital employed (ROCE)). Can also be measured before tax by replacing EBIT x (1- Tax rate) with EBIT. A measure of operating profitability.

Return on Sales (ROS)

Earnings after tax (EAT) divided by sales. Same as net profit margin. A measure of profitability.

Return on Total Assets (ROTA)

The Earnings before interest and tax divided by total assets. A measure of profitability.  

Resolving Credit Agreement

A legal agreement that a bank will lend a stated maximum amount of money over a fixed but renewable period of time.

Risk Premium

The difference between the expected return on a security and the risk-free rate.

S

Sale/Leasebacks

A transaction that involves the sale of an asset (such as Real Estate or Equipment) to a leasing or finance company and a subsequent lease of the same asset back to the original owner, who continues to use the asset.

Second Stage Funding (debt and/or equity)

Second stage funding is working capital for the initial expansion of a company that is producing and shipping, and has growing accounts receivable and inventories. Although the company has made progress, it may not yet be showing a profit.

Security

Certificate (or a book entry in the security holder's account) issued by a firm that specifies the conditions under which the firm has received the money.  

Security Offered

Types of security include a mortgage on the property, personal guarantees, other property collateral, letter of credit and third party guarantee.

Seed Capital Funds

Private venture capital firms specifically targeted to small business start-ups. Their investment and expected rate of return is generally higher than those of venture capitalists.

Seed Funding (debt and/or equity)

Seed funding is a relatively small amount of capital provided to an inventor or entrepreneur to prove a concept and to qualify for start-up capital. This may involve product development and market research as well as building a management team and developing a business plan, if the initial steps are successful.

Self-Liquidating Loans

Short-term bank loans to firms that need to finance the seasonal buildup in their working capital investment and that bankers expect the firm to repay with the cash that will be released by the subsequent reduction in working capital.

Short-Term Borrowing/Debt/Financing

Short-term, interest-bearing debt that includes bank overdrafts, drawing on lines of credit, short-term promissory notes, and the portion of any long-term debt due within a year.

Small Business Administration (SBA)

A government backed loan program for small businesses whereby the US Small Business Administration guarantees some portion of a loan administered by a private business lender such as a bank. A lending program designed to help foster and promote small business formation and development. (See SBA section at the end of this Glossary.)

Small Business Investment Companies (SBIC)

Privately organized and privately managed investment firms licensed by the Small Business Administration. SBIC play a vital role in the partnership between the government and private sector of the economy. With their own funds and capital from the federal government, SBICs provide venture capital to small independent businesses.

Speculation

Signifies a much higher degree of risk than investment, though often having better odds than gambling.

Statement of Cash Flow

Financial statement, such as FASB Standard 95, that provides information about the firm and the outside world by separating transactions into cash flows related to operating, investing, and financing activities.

Straight-Line Depreciation Method

Depreciation method according to which the firm's tangible fixed assets are depreciated by an equal amount each year.

Start-up Capital

A new business venture. In Venture Capital parlance, start-up is the earliest stage at which a venture capital investor or investment pool will provide funds to an enterprise, usually based on a business plan detailing the background of the management group along with market and financial projections. Investments or loans made at this stage are also called Seed Money.

Standby Letters of Credit

Back up financial facilities that provide assurances the contractual obligations will be met.

Stock (Equity)

Shares of stock represent a fraction of ownership in a corporation. As a partial owner, the stockholder is entitled to a partial share of earnings and dividends after taxes.

Subordinated Debt

Junior in claim on assets to other debt, that is, repayable only after other debts with a higher claim have been satisfied.

Subordinated Bond/Debt/Loan

Bond/debt/loan that has a claim on the firm's assets (in the event of liquidation) that follows the claim of senior debt holders. Same as junior bond/debt/loan.

T

Tangible Assets

Assets such as land, buildings, machines, and furniture (collectively called property, plant, and equipment) and long-term financial assets.

Time Value of Money

Time has value because a dollar received earlier is worth more than a dollar received later.

Times-Interest-Earned Ratio

The ratio of earnings before interest and tax (EBIT) divided by interest expenses. Same as interest coverage ratio. A measure of financial advantage based on income statement data.

Term Financing

Loans are available for a variety of purposes. Amortization is over five to seven years.

U

Unlevered Cost of Equity

The cost of equity of an all-equity financed firm. Can be estimated with the capital asset pricing model using the firm's asset beta.

V

Venture Capitalists

Venture Capitalists provide equity financing and hybrids financing structures (i.e. bonds and equity).   Venture Capitalists look for a high return on their investment.

Venture Capital Firm

An investment firm specializing in the financing of small and new ventures.

W

Weighted Average Cost of Capital (WACC)

Cash The weighted average of the after tax cost of debt and cost of equity. The minimum rate of return a project must generate in order to meet the return expectations of its suppliers of capital (lenders and shareholders).

Wire Transfer

Cash advance or a wire transfer usually occurs in a long-term relationship where the two parties know and trust each other.

Work-In-Process Inventory

The cost of the raw materials that were used in the production of unfinished units plus labor costs and other costs allocated to these units.  

Working Capital

Funds required for overhead and operations of a business.

Y

Yield To Maturity

The rate that makes the bond price equal to the present value of the bond's future cash-flow stream.

Z

Zero-Coupon Bond

A bond with no coupon payments that is sold at an original discount from face value.

SBA SECTION

SBA 504 Certified Development Companies

This program, commonly referred to as the 504 program, makes long term loans available for purchasing land, buildings, machinery and equipment, and for building, modernizing or renovating existing facilities and sites.

SBA 7(a) Loan Guaranty (Loan)

Function: Section 7(a) of the Small Business Act authorizes the SBA to guarantee loans to small businesses and is SBA's primary loan program. The SBA basic guaranty program generally is used to fund the varied long-term needs of small businesses. The program is designed to promote small business formation and growth by guaranteeing long-term loans to qualified firms. This allows participating lenders to make loans they normally could not make and offer better terms and conditions, such as low montyly payments. Loans are available for many business purposes, such as real estate, expansion, equipment, working capital or inventory. The SBA can guarantee 75 percent of the loan amount up to $1,500,000. For loans of $150,000 or less, the guaranty rate is 85 percent. The maximum loan amount cannot exceed $2 million. The interest rate cannot exceed 2.75% over the prime lending rate. Maturities are up to 10 years for working capital and up to 25 years for fixed assets. Customer: Small businesses. Delivered through: Commercial lending institutions.

SBA 7(m) Micro loan (Loan)

Function: Under this program, short-term loans of up to $35,000 are made to small businesses for the purchase of machinery and equipment, furniture and fixtures, inventory, supplies, and working capital. Proceeds cannot be used to pay existing personal debts, but business debts are authorized. These loans are made through SBA-approved nonprofit community partners (http://www.sba.gov/az/micaz.html), which also provide counseling and educational assistance. This program is available at a limited number of locations. Customer: Small businesses needing small-scale financing and technical assistance for start-up or expansion. Delivered through: Intermediary lenders (nonprofit organizations with experience in lending and technical assistance).

SBA Export Working Capital Program (EWCP), 7(a) Loan Program (Loan)

Function: The EWCP supports export financing to small buinesses. The program encourages lenders to offer export working capital loans by guaranteeing repayment of up to $1.5 milion or 90 percent of a loan amount, whichever is less.  A loan can support a single transaction or multiple sales on a revloving basis. Designed to provide short-term working capital to exporters the EWCP is a combined effort of the SBA and the Export-Import Bank. the two agencies have joined their working capital programs to offer a unified approach to the government's support of export financing.  The EWCP uses a one-page application form and stramlined documentation with turnaround usually 10 days or less. A letter of prequalification is also available from the SBA. See also International Trade. Customer: Export-ready small businesses. Delivered through: U.S. Export Assistance Center (949) 660-1688 x115.

SBAExpress, a 7(a) Loan Program (Loan)

Function: A new loan program being piloted with selected banks nationwide, SBAExpress encourages lenders to make more small loans to the small business community. Participating banks are permitted to use their own documentation and procedures to approve, service and liquidate loans of up to $350,000. In return, the SBA agrees to guarantee up to 50 percent of each loan. Customer: Small businesses. Delivered through: Commercial lending institutions with SBAExpress loan authority.

SBA International Trade Loan (ITL), a 7(a) Loan Program (Loan)

Function: The ITL offers long-term financing to small businesses engaged or preparing to engage in international trade, as well as those businesses adversely affected by import competition. The SBA can guarantee up to $1.25 million for a combination of fixed-asset financing and working capital. The working capital portion cannot exceed $750,000. See also International Trade. Customer: Export-ready small businesses. Delivered through: Commercial lending institutions.

Pollution Control Loan Program, a 7(a) Loan Program (Loan)

Function: Pollution Control Loans are 7(a) loans with a special purpose of pollution control. The program is designed to provide financing to eligible small businesses for the planning, design, or installation of a pollution control facility. This facility must prevent, reduce, abate, or control any form of pollution, including recycling. This program follows the 7(a) guidelines with the floolowing exception: Use of the proceeds must be for fixed-assets only. Delivered through: Commercial lending institutions.

Energy & Conservation Loan Program (ECLP), a 7(a) Loan Program (Loan)

Function: ECLPs are 7(a) loans with a special purpose of assisting small businesses to engineer, maufacture, distribute, market, install, or service energy measures to conserve the nation's energy resources. The program is designed to provide financing to eligible small businesses that need assistance saving energy. Approved energymeasures include sloar thermal energy equipment, active or passive systems, photovoltaic, related ECM services, equipment primarily for energy production from wood, biological waste, grain, or other biomass sources, hydroelectric generation equipment, wind energy conversion, industrial co-generation energy equipment, and all associated engineering, architectural, consulting, or other professional services. R & D proceeds may not exceed 30 percent of the total loan amount. Delivered through: Commercial lending institutions.

CAIP Program, a 7(a) Loan Program and 504 Loan Program (Loan)

Function: CAIP is a program established to assist businesses that are doing business in areas of the country that have been negatively affected by NAFTA. The loan fees are paid by NADBank and can be used with both the 7a and 504 Loan Programs. to be eligible, the business must reside in a country noted as being negatively affected by NAFTA. In addition, there is a job creation component of one job to be created for every $70,000 SBA guarantees. For 504 loans, one job has to be greated for every $50,000 SBA guarantees. Delivered through: Commercial lending institutions.