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Idea Cafe's CyberSchmooz
Financial Feasts

Financing message forum where you can get and give insights found nowhere else. Belly up to the table and request funding. Or tell your money tales. Any money talk is fair game except ads.

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Show Me the Money!
Belly up to the Financial Feasts table and talk turkey about money... what to look for, where & how? All money talk is fair game. Go


Words You Need to Know -- Idea Cafe's Financing Glossary

When you go in to a meeting with a potential funding source, you want to sound like you know what you're talking about. So we here at the Idea Cafe have provided you with a "cheat sheet." You can even keep this page up on your screen when you're on the phone with a potential investor or lender, just in case they use a word you haven't heard before. This page (like every page here at the Idea Cafe, of course) makes a really good bookmark.

Go to: 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


Individual who buys into a company at its very beginning.
annual meeting:
Once-a-year meeting at which the managers of a company present a report on its operations to shareholders, and the board of directors is elected for the coming year.
Estimate of the value of property, made by an expert.
Anything -- tangible or intangible -- with commercial value owned by a business, such as equipment, receivables or goodwill.
asset and liability statement:
Financial document showing the status of a company's assets and liabilites.
Professional examination of a company's accounting documents, for verification that they comply with Generally Accepted Accounting Principles.


balance sheet:
Financial report that shows the status of a company's assets, liabilities and owners' equity.
board of directors:
Members of the governing body of an incorporated company.
business plan:
A written document that gives an overview of your company, its future and its financials. It explains what your business is now, what you plan to make itinto in the future, how you're going to do it, how much it will cost and how much you'll make. A business plan includes a description of your company, your products and services, your target market, your sales and marketing strategy, your financial documents, and your management team.


"C" Corporation:
The classic corporate structure, it has the disadvantage that the corporation must pay corporate taxes before distributing income to its owners (resulting in "double taxation"), but has the advantages of allowing a greater number and type of owners. Companies with a large number of shareholders/owners (over 35), going public, or with institutional investors will usually have to be "C" corporations.
Funds necessary to establish or operate a business. Money.
cash flow:
Movement of money into and out of a company; actual income received and actual payments made out.
Assets pledged as security against a loan in case of default. Common collateral is equity in your home, stocks or bonds you own, certificates of deposits.
collection agency:
Firm that specializes in collecting past due accounts receivables and loan payments.
cost of goods:
the cost of the materials to produce the products you sell or the cost of the product you are going to resell; if you are a florist, the cost of goods may be the flowers, vase, ribbons to make up a bouquet; if you sell women's clothing, the cost of goods may be the cost of the sweater, dresses, sportswear, etc. you sell; cost of goods is a variable expense in that in changes depending on how much you are selling.
credit history:
Record of how reliably and punctually a company or individual has paid off past debts.
credit rating:
Official investigation of a company's or individual's history of repaying obligations; performed by a credit agency.
credit report:
Formal written evaluation of a company's or individual's credit history, generated by a credit agency.


debt financing:
Raising funds for a business by borrowing, often in the form of bank loans.
debt service:
Cash payments covering interest charges and principal due on outstanding loans. Your debt service is the amount of money you have to pay each period (month/year) to make your loan payments.
when you can not pay off a loan you have taken out or fail to make sufficient payments so that the loan goes into default.
dispute resolution agreement:
Legal agreement that lays out the methods and chronology that will govern future disputes--for example, when one partner wants to sell her part of the business, or dies, or in the event of bankruptcy; or if one party fails to keep to the terms of a loan.
Company or individual that arranges for the sale of products from manufacturer to retail outlets; the proverbial "middle man."
Payment by a corporation to its shareholders.
due diligence:
Process undertaken by venture capitalists, investment bankers or others to thoroughly investigate a company before financing it; required by law before securities are offered for sale.


Shares of stock in a company; ownership interest in a company.
equipment leasing:
Contracting to pay monthly fees to use equipment, instead of buying it.
estate planning:
Plan that lays out how an owner's property and possessions will be divided and administered after her death; can include a will and various trusts.


Factors buy current receivables at a discounted rate, typically 10% to 25%.
Fair Credit Reporting Act:
Federal law giving you the right to see, and challenge, your credit reports at credit reporting agencies.
SBA program that streamlines and attempts to shorten the loan process.
financial statement:
Written account of the financial condition of your company; includes balance sheet and income statement.


guarantee, loan:
Promise to take responsibility for payment of part or all of a debt if the person borrowing the money fails to pay off the loan; loans are often guaranteed by parents or family members of younger or newer entrepreneurs.



Initial public offering.
income statement:
Financial statement that shows operating results for a given time period; sometimes called a profit-and-loss statement
income-and-expense ratio:
Ratio of operating expenses to gross income; also called simply expense ratio.
Building or complex housing start-up or young businesses, where an entity, often the government, subsidizes rent, utilities and other overhead costs.
initial public offering:
First time a company's stock is sold to the general public (other than by a limited offering) through the stock market or over-the-counter sales.
institutional investor:
Organization that buys and sells large volumes of securities, such as a mutual fund, pension fund or bank.
investment banker:
Firm that acts as an intermediary between a company issuing securities and the public; an underwriter or agent who also advises the company issuing the stock.
investment banking:
Investment banking firms act as underwriters or agents for companies issuing securities, and advise the company on the issuanceand placement of its stock.




Debt in relation to equity; a highly-leveraged company is one with a high proportion of long-term debt.
Claim on the assets of a company.
Charge against property, making it security for the payment of an obligation, such as a debt, mortage, or unpaid taxes.
Limited Liability Company or LLC:
A relatively new form of corporate structure which combines some of the advantages of the "S" Corporation in terms of pass-through of income and losses avoiding double taxation, with some advantages of a "C" Corporation which allows greater latitude in who can be an owner.
line of credit:
A preapproved loan from a bank that you can draw on, as needed, for routine operating expenses.
Process in which shareholders or owners surrender their shares or interests in a business, generally when a company ceases to be a going concern. Proceeds go to pay creditors, and any balance is then distributed to shareholders.
Loan, generally for less than $100,000 requiring a low level of documentation and offering a rapid turnaround; one of the types of loans guaranteed by the SBA.




operating expenses:
Day-to-day expenses of running a business, from payroll to rent to supplies and marketing.


Legal relationship of two or more individuals to run a company.
partnership agreement:
Legal agreement setting out the rules for ownership and management of a partnership, and often the ways in which disputes will be resolved and any future sale of the company, or departure of its partners, handled.
personal loan:
Loan from someone you know.
prime rate:
Interest rate banks charge their best customers; loans to less creditworthy customers are pegged to the prime rate.
The amount of money you've borrowed in a loan. If you've taken out a one year $100,000 loan, with a 10% annual simple interest charge, the total you owe will be $110,000, but the principal is $100,000
private placement:
Sale of stock in a company directly to a pre-selected buyer, often an institutional investor.
profit-and-loss statement:
Summary of a company's revenues, costs and expenses during one accounting period. Together with a balance sheet, it makes up a company's financial statement. Sometimes called an income statement.
promissory note:
Written legal promise requiring the signer to pay back a loan by a fixed date; often simply called a "note."
public offering:
Offering of a company's shares to the general public; requires registration with the SEC.



Money owed for goods or services already rendered.
Extending the date a loan is due, or adjusting the interest rate on a loan, or increasing the amount of a loan.
return on equity:
Amount earned on a common stock investment in a given period; expressed as a percentage, and plotted over time to express how well stockholders' money is being used.
right of first refusal:
Legal agreement guaranteeing one party the first crack at buying a business or property.
return on equity.


"S" corporation:
In "subchapter S" of the Internal Revenue Code, a corporation having 35 or fewer shareholders is allowed (if it meets other requirements of the code) to be taxed as if it were a partnership with the income "passing through" to the owners; this allows a small corporation to distribute income directly to its shareholders and avoid corporate income tax or double taxation
Lease in which a company sells an asset to another entity-- such as an insurance company, institutional investor, finance or leasing company--in exchange for cash, then leases back the same asset. Often used as an alternative to traditional financing if the cost of leasing is lower than paying prevailing interest rates.
Small Business Administration.
Small Business Investment Company.
Securities and Exchange Commission.
secured credit card:
Credit card obtained from the bank where you have a savings account, with a limit generally lower than the amount in your savings account.
Securities and Exchange Commission:
Federal agency made up of five commissioners whose job is to promote full disclosure by publicly traded companies and to protect the public against wrongdoing in the securities industry. Securites issues must be registered with the SEC, which also supervises all national securities exchanges.
seed money:
First money put into a start-up.
Name for the biggest category of SBA-backed loans.
Owner of shares in a corporation.
Small Business Administration:
Federal agency that aims to assist small businesses with advice, financing, and other business developmentaid. The SBA itself does not make loans, but guarantees repayment of loans made by a bank or finance company.
Small Business Investment Company:
Small Business Investment Companies, affiliated with the Small Business Administration, channel private investors' money, combined with some government money, to small, fast-growing companies.
sole proprietorship:
Company owned and managed by one person.
stock analyst:
Individual, often employed by a brokerage firm or financial institution, who studies the stock and financial performance of publicly traded companies and issues reports--and buy or sell recommendations--based on his findings.
strategic partner:
Agreement with another company to undertake business endeavors together on each other's behalf; can be for financing, sales, marketing, distribution or other activities.
subordinated debt:
Debt that is repayable only after other debts have been repayed.




variable expense:
venture capital:
Money invested in new enterprises.
venture capitalist:
Individual or firm who invests money in new enterprises.


working capital:
Cash available to the company for the on-going operations of the business.






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