A
- Accounts Payable (AP)
Money owed by a company to its creditors.
Accounts Receivables (AR)All monies a business is owed in return for the provision of its services.
Accounts Receivables FinancingUsing amounts owed by customers as collateral in raising a secured short-term loan. In case of default, the lender has the right to collect receivables directly from the named debtors.
Acquisition FinancingThe type of funding that is obtained by a business for the purpose of buying another business.
AcquisitionsThe process where one business purchases the shares and assets of another, ultimately taking control of that company.
Advance rateExpressed as a percentage of the full invoice value, this is the sum that is released by the funder after the client raises an invoice, typically within 24 hours of its issue.
Aged debt reportA report, usually generated from the invoice date, summarising the outstanding balances for each of the client’s debtors over a specific period.
Annual ReturnAn annual return is a picture of a business's present signed up information on the Annual Return day. An Annual Return ought to not be confused with a firm's yearly account.
ApostilleAn apostille is an international certification affixed either to the original legal document or to a notarized copy of the original legal document that allows to confirm the authenticity the signature, capacity and seal of the said document’s emitter. It is obtained and used in the countries part to the Hague Convention Abolishing the Requirement of Legalization for Foreign Public Documents (“Hague Apostille Convention”). It eases the acceptance by authorities or regulated operators like banks of documents originating from another member State. For the full list of countries part of the Hague Apostille Convention, please check the following link : https://www.hagueapostille.co.uk/hague-members
Apostilles are affixed by competent authorities designated by each member State. For instance, in the United Kingdom (“UK”), the apostille is affixed by the UK Foreign and Commonwealth Office which is also known as the legalization office which can create confusion with the legalization procedure.AppraisalImpartial analysis and evaluation conducted in accordance with established criteria to determine the value of something.
Appraisal ApproachThe method used to determine an asset’s value. The appraisal approach values an asset on several factors, such as cost, the income it generates or a comparison of the market value of the asset.
Approved debtThe debts the invoice finance company are prepared to fund or purchase.
Articles of IncorporationA legal document filed with a government body that creates a corporation.
AssessmentThe procedure used to determine the value of a property or the income of an entity, in order to charge taxes to that property or entity.
Asset-Based FinanceA business loan secured whereby the asset being bought is used as collateral.
Asset-Based LendingA funding solution that releases cash against assets on a business’ balance sheet, including property, plant, machinery, stock and debtors.
AssetsAnything that a company owns with a residual monetary value.
Assignment of debtThe mechanism by which the funder obtains the legal rights to collect monies directly from the client’s debtors, from which the funder retains the factoring charge before forwarding the difference to the client.
Associated businessesAny other business that a company either wholly or partially owns, or has an element of control over.
Availability (of funds)The amount of cash the client is able to draw each day should they require. This figure is calculated by multiplying the approved debts by the advance rate, minus the amount already drawn plus charges accrued to date.
B
- Balance Sheet
A report that summarizes all of an entity’s assets, liabilities, and equity as of a given point in time
Balloon LoanA mortgage that requires a larger than usual one-time payment at the end of the term. This allows lower payments in the years before the balloon payment becomes due.
Balloon MortgageA mortgage which does not fully amortize over he term of the note, leaving a balance due at maturity.
Balloon OptionAn option contract where the strike price increases by a certain ratio after the price of the underlying asset reaches a predetermined amount.
Balloon PaymentA lump sum payment that is attached to a loan. This payment is typically made at the end of the loan period.
Bank Confirmation Letter (BCL)A letter confirming that a loan or line of credit has been established with specific financial institution.
Bank GuaranteeA promise from a bank or lending institution that if a borrower defaults on a loan, the bank will cover the loss.
Bilateral ContractAn agreement between two parties that contains a promise by each party to fulfill certain obligations to fulfill it.
Bill of SaleA document that transfers ownership of a asset from one party to another.
Bills PayableA document that shows the amount owed for goods or services received on credit.
Blanket MortgageA mortgage that is used to fund the purchase of more than one piece of property.
Brick and MortarA term used to describe a business that operates in a building rather than virtually or online.
Bridge FinancingA short term loan advanced to cover the period between the termination of one loan and the beginning of another.
Bridge InsuranceInsurance that covers damage to bridges.
Bridge LoanA short term loan advanced to cover the period between the termination of one loan and the beginning of another.
BrokerA person who acts as an agent for others, as in negotiating contracts, purchases, or sales in return for a fee or commission.
Building PermitsFormal approval of building plans by the designated government agency as meeting the requirement of prescribed codes.
Business AssetA piece of property or equipment purchased for business use.
Business Exit StrategyThe method by which a business owner intends to get out of an investment.
Business ExpensesAn expense incurred in the course of business.
Business GuaranteeAn agreement in which debts incurred by a business are the responsibility of the business. It shifts the responsibility for debts incurred by the business owner to the business itself.
Business Liability InsuranceInsurance that protects a business in the event of a lawsuit.
C
- Capitalization
Conversion of the retained earnings of a firm into capital through a new issue of stock.
Capitalization RateThe interest rate used to calculate the present value of a number of future payments.
Cash flowA measure of a company’s immediate financial health that is calculated by cash receipts less cash payments over a specific period in time.
Cash flow financeAny funding solution that is primarily aimed at easing a company’s immediate cash flow.
Cash Flow Return on Investment (CFROI)The measurement of a company’s cash return on invested assets. It is determined by dividing a company’s gross cash flow by its gross investment.
Cash Flow StatementA statement every publicly traded company must file each quarter indicating all cash inflows and cash outflows from all sources, whether they are business activities or the company’s investments.
Certified Financial StatementA financial statement outlining a company’s financial activities that has been prepared by a Certified Public Accountant (CPA).
Chapter 10A chapter of the United States bankruptcy code which states the terms under which a small company may file for bankruptcy protection while it prepares a reorganization plan.
Chapter 11A chapter of the United States bankruptcy code which states the process of the reorganization of a bankrupt company under the supervision of a court.
Chapter 12A chapter of the United States bankruptcy code which states a type of bankruptcy that may be filed by family farmers or family fisherman.
Chapter 13A chapter of the United States bankruptcy code under which individuals may attempt to restructure their finances in order to repay their debts.
Chapter 15A chapter of the United States bankruptcy code which allows proceedings for a foreign debtor or other related parties to access United States Bankruptcy Courts.
Chapter 7A chapter of the United States bankruptcy code under which companies and individuals liquidate their assets in order to repay their debts.
Chapter 9A chapter of the United States bankruptcy code available exclusively to municipalities, that assists them in restructuring of their debts.
ChattelAn item of property other than real estate.
Chattel MortgageA mortgage that provides for a security interest in assets other than real estate to secure the loan.
Closing CostsThe expenses associated with buying real estate.
CollateralAn item of value that is pledged to guarantee repayment of a loan.
CollateralizationWhen a borrower pledges an asset as collateral in the event that the borrower defaults on a loan.
Collateralized Debt Obligation (CDO)An asset backed security backed by the receivables on loans, bonds or other debt.
Commercial and Industrial (C&I) LoanA loan to a business rather than to an individual consumer to provide either working capital or to finance a major capital expenditure.
Commercial General Liability (CGL)A type of insurance that provides coverage to a business to protect against claims for bodily injury or property damage.
Commercial property mortgagesA long-term loan typically provided by banks or building societies to provide cash to purchase a commercial property. Repayments on the loan, plus interest, are made at a fixed or variable rate at monthly or quarterly intervals, depending on a company’s individual circumstances.
Commercial Real Estate (CRE)Property owned to produce income.
Commercial Real Estate LoanA loan secured with commercial rather than residential property.
ConcentrationThe percentage of the client’s sales ledger value that is accounted for by its biggest client(s)
Confidential Invoice Discounting (CID)An invoice finance facility where a funder releases cash against a business’ debtors within 24 hours of the issue of invoices. The confidential aspect does not disclose the use of such a facility from the business’ customers and allows the client to retain control of its sales ledger management.
Construction BondForm of surety bond specific to construction that guarantees the performance of the builder according to project specifications.
Construction LienA lien that provides builders and contractors legal recourse to get paid for work and materials purchased for a project.
Construction LoanA short term loan used to finance the construction of a home.
Construction MortgageA short term loan used to finance the construction of a home.
Contra-tradingA relationship whereby a business buys and sells products to and from the same customer.
Cost of fundsThe interest /discount rate a client will be charged on top of the money they are lent, typically expressed in the amount over the specific lender’s base rate or BoE Reference Rate.
Credit insuranceTrade credit insurance protects businesses from debtor non-payment that could arise from insolvency or protracted default (i.e. non-payment after six months), where the lender assumes the risk and will pay the client a percentage of the sales ledger value in such an event. This can either be provided as a standalone product or incorporated into a non-recourse invoice finance facility, and is subject to designated credit limits
Credit limitDesignated limit assigned by an Insurer. Also, the amount of credit a client is prepared to extend to any of its customers
Credit managementA term used to describe a company’s management of its accounts receivable.
Current accounthe account which shows the financial obligation between the invoice financier and a client; this is a total of all prepayments made and all fees accrued on the account less all collections received from the client’s customers.
Current assetsAny assets that are expected to be converted into cash within 12 months of entry onto the balance sheet, including stock and debtors.
Current Market Value (CMV)The current price an asset would receive if it were sold.
D
- Debt
Monies owed to a business or organisation in the form of loans, overdrafts and outstanding invoices.
Debt / EBITDAThe ratio of a company’s ability to pay off its incurred debt.
Debt / Equity RatioA measure of the ratio between a company’s assets provided by creditors to assets provided by shareholders.
Debt collectionThe process of retrieving monies owed. This can either be performed in-house or be outsourced to a specialist debt collection agency or provided as part of an invoice finance facility via the factoring company.
Debt ConsolidationThe combining of several debts into a single, more favorable loan.
Debt financeCorporate finance facilities where the client borrows money such as loans, bonds, mortgages or overdraft agreements.
Debt RestructuringThe restructuring of the terms of a loan to a company in order to avoid default on payments.
Debt-To-Capital RatioThe ratio of a company’s total debt compared to its total capital, its debt and equity combined.
Debtor protectionDebtor protection is incorporated into a non-recourse invoice finance facility, safeguarding the client from debtor non-payment as the funder assumes the risk, subject to designated credit limits. It is similar to credit Insurance, only it is provided by the funder.
Deed In Lieu Of ForeclosureA deed in which a borrower transfers all interest in a real property to the lender to satisfy a loan that is in default to avoid foreclosure.
DefaultThe failure by a company to pay its legal obligations of debt repayment when due.
Default JudgmentA binding judgement in favor of a party based on a failure to act by the other party.
Default RiskThe risk that a company will be unable to make necessary payments on their obligations in a timely manner.
Deficiency JudgmentA judgment against a borrower whose mortgage foreclosure sale did not produce enough funds to repay the loan in full.
DilutionThe ratio of credit notes issued by the client to invoices. This also accounts for write-offs and reassignments.
Direct leaseA funder purchases an asset on a business’ behalf before leasing it to the client in return for regular payments, plus interest.
DirectorDirectors are designated to run a business.
Disapproved debts (Disapprovals)Debts against which a lender will not provide funding for reasons such as they are too old (typically from 90 or120 days, depending on the funder), irrecoverable, disputed by the debtor, or if the debtor is renowned for its bad credit history.
Disclosed discountingAn invoice finance facility where the funder releases capital against debtors within 24 hours of an invoice’s issue, boosting the client’s cash flow. Unlike Confidential Invoice Discounting (CID), the customers are aware of the funder’s involvement. The client retains the collection function in-house.
Discount chargeThe sum (equivalent to interest) that is charged on the amount of borrowing. This is usually applied daily and debited monthly.
Due Diligence (DD)The process of investigating an asset prior to purchase to ensure there are no unexpected problems with the asset.
E
- Earnest Money
Is money paid by a buyer showing commitment to a purchase after a seller has accepted the buyers offer.
EBITARefers to a company’s earnings before the deduction of interest, taxes and amortization expenses.
EBITDA-To-Interest Coverage RatioA ratio used in accessing a company’s financial staying power by determining if it is profitable enough to pay off its interest expenses.
Economic lifeThe period within which an asset has an economic value and is efficiently functional.
EquityThe value of an ownership interest in property, including shareholders’ equity in their business.
Equity FinanceEquity finance helps businesses to achieve their growth objectives by raising capital from external investors in return for a share of your business.
Equity ParticipationOwnership shares in a company or property.
Escrow AgentA third party agent that holds a document or asset on behalf of a party to be delivered to a beneficiary within a specified time as specified in the escrow agreement.
Escrow AgreementAn agreement that describes the terms by which one party deposits an asset with a third party who will deliver the asset to another party if and when the terms of the contract have been met.
Exit StrategyA predetermined plan for an owner to exit their business.
Export debtsDebts accrued from the sale of goods and services to overseas customers who can be invoiced in either sterling or another currency.
Extrinsic ValueThe portion of an item’s worth that is assigned to it by external factors.
F
- Facility limit
The maximum amount a business’ current account balance can be drawn at any one time. This figure can vary in line with turnover.
FactoringAn invoice finance facility where a lender releases cash against debtors within 24 hours of an invoice’s issue, freeing up capital to boost the client’s cash flow. The factor further provides a dedicated sales ledger management service to recover the debts on behalf of the client. There is also the additional option of a non-recourse facility that incorporates debtor protection, thus protecting the client from debtor non-payment.
Factoring chargeThe service fee charged by a factor that is usually expressed as a percentage of the client’s sales ledger value, although some operate at a fixed annual fee, which is debited monthly.
Factoring companyA lender that releases funding against a business’ accounts receivable while additionally providing a dedicated sales ledger management service.
Fair Market ValueThe price at which an asset is sold and bought in the open market.
Feasibility StudyAn assessment of the ability to complete a proposed project.
FiduciaryA person who has the power or obligation to act for another.
FinanceCorporate funding provided through the purchase of assets in return for a security interest.
Financial AnalysisThe conversion of financial data into useful information for decision making about a company.
Fixed assetsAssets owned by the business that are unlikely to be quickly converted into cash, including property, fixed machinery, fixtures and fittings.
Full Recourse DebtIs a debt that the borrower is responsible for repaying regardless of circumstances such as loss of job or illness.
Full service factoringAlso known as non-recourse factoring, this is an invoice finance facility where a lender releases cash against debtors within 24 hours of an invoice’s issue, freeing up capital to boost the client’s cash flow. The factor further provides a dedicated sales ledger management service to recover the debts on behalf of the client, while the facility additionally incorporates debtor protection to protect the client from debtor non-payment.
Fully Amortizing PaymentThe monthly mortgage payment, which if unchanged for the life of the loan at the original interest rate, will pay off the loan at the end of its term.
G
- General Account
A deposit account. Assets in a general account can be sued to cover a company’s expenses and are subject to creditors’ claims.
Generally Accepted Accounting Principles (GAAP)The common accounting guidelines as determined by the accounting industry that companies use to compile their financial statements.
Good Faith EstimateStates all the costs associated with a mortgage. It provides a borrower with information needed in order to select a mortgage.
Gross EarningsA company’s income before taxes and deductions.
Gross ProfitA company’s profit after deducting expenses associated with making or selling its products.
Gross SalesA company’s overall sales reported for any given period.
H
- Hard Asset
A tangible or physical asset. Examples include real estate, oil, gold, or cash.
Hard MoneyCurrency that is based on an actual fixed item and has value such as gold or silver coins, or a specific type of loan whereby a borrower receives funds secured by real property.
Hedge FundPrivate partnership of investors that operate with little or no regulation from the Securities and Exchange Commission. Hedge funds operate under high risk methods in hopes of realizing large capital gains.
Historical CostThe original cost of an asset at the time of purchase.
Holding CompanyA company that controls other companies through stock ownership but does not typically engage directly in their operations.
HypothecationTo pledge an asset as collateral for a loan.
I
- Identifiable Asset
Tangible or intangible assets that have value and can provide future economic benefits to a company.
Income ApproachA method of determining the appraisal value of a property on the basis of its opportunity cost.
Income PropertyReal estate purchased for the purpose of generating income.
Income Property MortgageA loan given to purchase rental property.
Independent AuditorA certified public accountant from an outside accounting firm who examines financial records of a company.
Industrial ParkAn area designed and zoned for industrial use.
IneligiblesThe value of debts disapproved by the funder, commonly because of disputes, overdue balances, and those invoices that are above the client’s designated funding limit.
Initial Cash FlowThe initial investment that is paid into a project at the beginning.
Insufficient FundsA situation where sufficient funds are not available in an account to cover a demand of payment.
Interest RateA rate at which interest is paid by a borrower for the use of money borrowed from a lender.
International InvestingWhen a company or individual from one nation invests in assets of a company based in another nation.
Inventory FinancingA loan made to a company using its inventory as collateral.
InvestorAn investor is the proprietor of a firm restricted by shares.
Invoice discountingAn invoice finance facility where a lender releases cash against debtors within 24 hours of an invoice’s issue, freeing up capital to boost the client’s cash flow. Unlike factoring however, the client retains control of the sales ledger management. There is also a non-recourse option that incorporates debtor protection to protect against debtor non-payment, as well as a confidential offering to conceal the facility from the client’s customers.
Invoice financeA funding solution that primarily releases capital against debtors through invoice discounting and factoring to boost the client’s cash flow, but can additionally provide funding against other assets on the balance sheet through asset based lending, including stock, property, plant and machinery.
Invoice FinancingA form of short term borrowing used to improve a company’s working capital and cash flow.
J
- Joint Venture (JV)
A business deal in which two or more company’s enter a partnership but otherwise retain their distinct identities.
Judicial ForeclosureA foreclosure that goes through the court system.
Junior MortgageA second (or third or fourth) mortgage on the same property.
L
- Land Contract
A written legal agreement used to purchase real estate.
Land Lease Optiona) an option that is associated with a lease contract and is used for the purpose of granting the lessee the right to extend the lease beyond its original length. Often the lessee will be required to pay a premium for this option. b) when a company purchases a dwelling and pays rent on the land to the landowner..
LeaseA funder purchases an asset before leasing it to a business in return for regular payments, plus interest, to help the client purchase an asset without compromising its cash flow.
Lease OptionA type of contract in which a tenant is given the right purchase the leased property under certain circumstances.
Lease rateThe payments due to the lessor by the lessee in return for renting an asset, determined by its value, the duration of the lease and the interest to be paid.
Lease To OwnA type of contract in which a tenant is given the right, but not the obligation to purchase the leased property often at a predefined price and time.
LesseeThe Company who rents an asset from a financier in return for regular payments.
LessorThe Company who supplies an asset to a lessee in return for regular payments, and has full ownership and responsibility over its maintenance costs.
Letter Of ComfortA letter indicating a willingness from one party to another to enter into a contract.
Letter Of CreditA letter from a bank guaranteeing a buyer’s payment to a seller. In the event that they buyer is unable to make payment, the bank will cover the outstanding amount.
LiabilityA legally binding obligation payable to another entity.
Licensing AgreementA legal contract between two parties in which the contractual owner of the property gives permission to another to use that property.
LienA legal claim against an asset which is used to secure a loan and which must be paid when the property is sold.
Limited Liability PartnershipLLP represents the Limited Liability Partnership that resembles regular company collaboration with the one distinction being that the individual liability of the companions is restricted.
Liquid AssetAn asset that can be converted into cash quickly with little or no loss in value.
Lis PendensA written notice that a lawsuit regarding the title to real property or some interest in that property has been filed.
Loan Application FeeA fee charged to process an application for a loan.
Loan CommitmentAssurance by a lender to make money available to a borrower.
Loan CommitteeA committee that reviews and either approves or rejects a loan application that the initial loan officer does not have authority to approve.
Loan Loss ProvisionA noncash expense that books use to account for future losses on loan defaults.
London Interbank Offered Rate (LIBOR)The interest rate participating banks offer to other banks for loans on the London market. It is the most widely used benchmark for short term interest rates in the world.
Loss CarrybackWhen a company retroactively chooses to apply a net operating loss in the current year to the previous profitable year(s) in order to obtain a tax refund for monies already remitted on the profits earned in those years.
M
- Management Buy-In (MBI)
A new management team assumes control of a company after acquiring its shares or assets.
Management Buy-Out (MBO)The existing management team assumes control of its parent or non-group company after purchasing its shares or assets.
Market ApproachA method of valuing an asset by comparing dates from the sales of similar assets that have occurred within the same geographic area and within a recent timeframe.
Master LeaseVia a contractual arrangement, additional assets are able to be leased keeping the same terms and conditions, without having to renegotiate the contract.
Master MortgageA document created when a property is purchased for the first time that is filed in the records for public land for the purpose of keeping track of the initial mortgage and any liens that might be attached to the property.
Mechanic's LienA guarantee of payment to builders or contractors for the monies owed to them.
Meeting Of The MindsWhen the parties to an agreement all have the same understanding of the terms of the agreement.
MergerThe joining of two companies to create a single, larger entity.
Mergers And Acquisitions (M&A)A general term used to refer to the consolidation of companies.
Mezzanine financeMezzanine finance falls in the middle of two main forms of funding, debt and equity. It is typically used to support specific projects for growth and acquisition. A blend of debt and equity financing, mezzanine is one of the highest-risk forms of borrowing, but offers some of the greatest returns to businesses.
A type of financing in which a company issues debt that the holders may convert into equity if the debt is not repaid in full on time.
Modified Adjusted Gross Income (MAGI)The total of a household’s adjusted gross income and any tax exempt interest income you may have.
Mortgage BankerA company or individual that originates mortgages.
Mortgage Bankers Association (MBA)The national association that represents the real estate finance industry.
Mortgage BrokerA company or individual that places mortgage loans with lenders but does not originate the loan.
Mortgage ModificationA permanent restructuring of a mortgage where one or more of the terms of a borrower’s loan are changed to provide a more affordable payment.
Mortgage-Backed Security (MBS)Bonds backed by payments on mortgage loans.
N
- Negative Amortization
A loan repayment schedule in which the outstanding principal balance increases rather than amortizing because the monthly payments do not cover the full amount required to amortize the loan. The unpaid interest is added to the outstanding principal to be paid at a later time.
Net Income (NI)A company’s total earnings after costs of doing business, depreciation, interest, taxes and other expenses have been deducted.
Net LossA situation where a company’s expenses exceed income during a given period of time.
Net Operating Income (NOI)The amount by which a company’s operating revenue exceeds operating expenses during a given period of time.
Net working capitalThe cash available to a business to spend, calculated by working out its current assets less its current liabilities.
Net WorthA company’s assets minus liabilities.
No Documentation Mortgage (No Doc)A mortgage obtained with no income, no asset and no employment verification.
No Income / No Asset Mortgage (NINA)A mortgage that is obtained without disclosing income or bank statements on the loan application.
Nominee DirectorThe nominee director service may be used where a client doesn’t wish to be personally appointed or has to meet local requirements. The name of the director will appear in the corporate documents, in any business contract and sometimes in the jurisdiction's business register.
Upon appointment of a nominee director, a Nominee Service Agreement will be signed between the client and the nominee. It will guarantee the client that the nominee can only act or sign documents upon the client's request and with the client's prior approval. Professional directors introduced by UKStartups.co work with the highest level of integrity and confidentiality.Nominee ShareholderThe nominee shareholder is appointed in order to detain shares on behalf of the owner of the company. The name of the shareholder will appear in the corporate documents, and sometimes in the jurisdiction's business register.
Upon appointment of a nominee shareholder, a Nominee Service Agreement (declaration of trust) will be signed between the client and the nominee. Nominee shareholders introduced by UKStartups.co work with the highest level of integrity and confidentiality.Non-recourse facilityAn invoice finance solution which benefits from the addition of debtor protection to shield the company against debtor non-payment through either insolvency or protracted default, subject to designated credit limits.
Non-Recourse FinanceA loan secured by the revenue of the project the loan intends to fund.
Non-Sufficient Funds (NSF)A situation where the amount available in an account is insufficient to honor a cheque drawn on that account.
NotarisationThe notarization is the official fraud-deterrent process conducted by a notary public commissioned by a public authority to help deter fraud. It is often a three-part process that includes vetting, certifying and record-keeping. Notarizations are sometimes referred to as "notarial acts." By notarizing a document by a duly commissioned and impartial notary public, this gives the assurance that a document is authentic, that its signature is genuine, and that its signer acted without duress or intimidation, and intended the terms of the document to be in full force and effect.
O
- Occupancy Rate
The ratio of units occupied versus the total number available in a building during specified period of time.
Open-End MortgageA mortgage that may allow the borrower to increase the amount of the mortgage at a future time.
Operating Cash Flow (OCF)A company’s earnings before depreciation minus taxes.
Operating ExpenseExpenses incurred in carrying out an organizations day to day activities that are not directly related to production.
Operating Income Before Depreciation And Amortization (OIBDA)The income generated by a company in a given time period without consideration of capital spending or taxes.
OptionA contract through which a seller gives a buyer the right, but not obligation, to buy or sell something at a predetermined price within a specified time period.
Oral ContractAn agreement between parties that is partly or entirely dependent on spoken words.
Out-Of-Pocket ExpensesAn expense incurred and paid for by an individual for personal use, or relating to one’s employment that may or may not be later reimbursed.
Over-advance / Over-paymentWhere the funder occasionally releases additional cash, over and above the amount available under the agreed terms, on a discretionary basis and for a short period, ranging from a single day to a few weeks to help the client deal with a period of limited cash flow.
OvercapitalizationA situation where a company has issued more debt and equity than its assets are worth. This situation is typically remedied by the company buying back shares or paying off debt.
Overcollateralization (OC)Using an asset as collateral on a loan whereby the value of the asset exceeds the value of the loan.
OverheadOngoing operational expenses incurred by a business.
Owner FinancingFinancing where the buyer borrows from the seller instead of, or in addition to, a bank.
Owner-OccupantA situation where the home owner resides in the home in which he or she owns.
P
- Par Value
Face value. Passive Income – income that does not come from active participation in a business such as income from rent or a limited partnership.
Pari-passuEqual in all respects.
Partial ReleaseIs a provision in some mortgage contracts that allows the borrower to exclude some of the collateral from the mortgage contract.
Perfect TitleA title that is clear and free from any liens attached to it.
Perfected LienSecurity interest in the collateral securing a debt that is protected from third party claims.
Performance AppraisalAn annual employee review to evaluate an employee’s overall job performance.
Performance BondA written guarantee from a third party guarantor given to a client by a contractor to ensure payment of money in case the contractor fails to fulfill the entire contract.
Personal Financial StatementA document or spreadsheet that details personal assets and liabilities without including any business related assets or liabilities.
Personal GuaranteeAn agreement that makes you liable for your own or a third party’s debts or obligations.
Personal IncomeAn individual’s total earnings during a given period.
Personal PropertyPersonal possessions, other than real estate or buildings. Personal property is movable and includes tangible and intangible items.
Piggyback MortgageA second mortgage taken by a home mortgage borrower at the same time as the first mortgage. It is generally used to eliminate private mortgage insurance payments by lowering the loan to value ratio of the primary mortgage below 80%.
PIPEPrivate Investment in Public Equity
PipelineAn investment company whose purpose is to collect investment funds from a group of individual investors and invest them in financial securities.
PlacementThe sale of securities directly to an institutional or private investor, rather than to the general investing public.
Point Of Sale (POS)The point at which a sale is made and the ownership is transferred from the seller to the buyer.
Political Risk InsuranceA type of insurance that can protect the policyholder from the risk that a foreign government will make significant changes to its policies that would result in a loss of investment.
Pooled FundsA unit trust in which an investor contributes funds that are then invested by a third party.
Portfolio IncomeIncome derived from various types of investments and includes capital gains, interest, dividends and royalties.
Portfolio InvestmentInvestment in securities simply for financial gain without creating long term interest in, or management control of, the organization.
Portfolio ManagerThe professional responsible for the securities portfolio of an individual or institutional investor. The portfolio manager has the fiduciary responsibility to manage the assets prudently and choose which asset types are appropriate for the portfolio.
Portfolio ReinsuranceReinsurance whereby the reinsurer takes on a portion of the ceding insurer’s entire portfolio.
Power of AttorneyA legal document appointing another person to make decisions on your behalf.
Power of Attorney of PropertyA legal document that transfers the legal right to manage property to the attorney in the event an individual is unable to do so.
Pre-ApprovalAn evaluation by a lender of a potential buyer that determines if the buyer qualifies for a loan and/or the maximum amount the lender would be willing to lend the buyer.
Prepaid ExpenseExpenses that are paid in advance of actually incurring them such as rent or insurance.
Prepaid Finance ChargeCharges made in connection with a loan that must be paid by the borrower at the time of close of the loan.
Prepaid InsurancePayment made in advance for insurance services that are to be provided over a specified period of time.
Prepaid InterestInterest on a loan that is paid in advance of the time it is earned by the borrower.
PrepaymentTo pay a debt in full before its official due date.
Prepayment PenaltyAn additional fee imposed by a lender when a loan is paid in full before its official due date.
Prime BorrowerSomeone who is considered to have below average credit risk.
Prime RateThe best available interest rate under most circumstances. It is used as a benchmark for interest rates on business and consumer loans.
Prior LienA lien on an asset that has priority over other liens attached to the same property.
Private CompanyA company whose ownership is private.
Private EquityInvestment in an organization that is not listed on any stock exchange.
Private Finance Initiative (PFI)A method of generating financing through private ventures to fund long term public projects.
Private Mortgage Insurance (PMI)An insurance policy purchased by the mortgage holder on behalf of the lender to protect the holder from default of a mortgage loan.
Private PlacementThe sale of a security directly to a limited number of investors. It is not offered to the public.
PrivatizationThe process of transferring an enterprise from the public sector to the private sector.
Pro FormaA financial projection based on assumptions.
Pro-Forma ForecastA financial forecast based on pro forma income statements.
Production CostCosts related to making or acquiring goods or services that directly generate revenue for an organization.
ProfitFunds remaining after total costs are deducted from total revenue.
Profit and Loss Statement (P&L)A financial report that shows a company’s revenues and expenses over a given period of time.
Profit/Loss RatioOverall measurement of the profitability of a trading system.
Project FinanceA type of financing where project debt and equity used to finance a project are repaid from the funds generated by the project.
Project ManagementThe application of processes, methods, knowledge, skills and experience used to achieve a project’s objectives.
Promissory NoteA written, signed unconditional promise to pay a certain amount of money at a specified time.
Proof of Funds (POF)A document that demonstrates an individual has enough money for a transaction.
Property LienA claim against property of someone who owes money.
Property ManagementThe operation, control and oversight of residential, commercial and/or industrial real estate.
Property taxA tax assessed on the market value of real and personal property.
Public CompanyA company whose shares are traded on a stock exchange.
Purchase AcquisitionA method of accounting, using market value for the consolidation of two entities’ net assets on a balance sheet.
Purchase And Sale Statement (P&S)A statement that is given to the customer whenever a position in a contract is offset or closed.
Purchase optionAn option following a lease contract that allows the lessee to purchase the asset outright at either its fair market value or a predetermined amount.
Purchase PriceThe price at which property is purchased.
Purchase-Money MortgageA mortgage issued to the purchaser of a home by the seller as part of the purchase transaction. This mortgage is used when the purchaser does not qualify for a bank loan.
Q
- Qualified Appraisal
A document that is made, signed and dated by a qualified appraiser in accordance with generally accepted appraisal standards.
Qualified AppraiserAn individual who has earned an appraisal designation from a recognized professional organization or has met a certain minimum education and experience requirements.
Quarterly Earnings ReportA report made by a public company to report their quarterly performance.
Quick Liquidity RatioThe total amount of a company’s quick assets divided by the sum of its net liabilities.
QuorumThe minimum number of voting members of a group who must be present at a meeting in order to conduct business.
R
- Rate of Return
The amount of revenue an investment generates over a given period of time as a percentage of the amount of capital invested.
Real EstateLand as well as any physical property attached to it.
Real Estate Short SaleA sale of real estate for an amount that is less than the amount owed on the property.
ReassignmentA debt that has been returned to the client from its funder.
ReceivablesAn amount due to a company by a customer, supplier or any other party.
ReconciliationMatching the balance of the client’s sales ledger to the balance recorded by its invoice finance provider; a process usually undertaken at monthly intervals, to reflect the previous month-end position. Deadlines for this process vary from funder to funder.
ReconciliationThe accounting process used to compare two sets of records to ensure the numbers are accurate and the values are balanced at the end of a certain period of time.
Recourse facilityAn invoice finance facility that provides access to cash but does not incorporate bad debt protection through credit insurance, potentially leaving the client vulnerable to debtor non-payment through customer insolvency or protracted default.
Recourse periodThe period in which a funder will advance monies against an outstanding invoice. This typically ranges from 60-120 days, although it can sometimes cover up to 150 days.
Refactoring feeA charge issued by some funders (relating to factoring facilities only) to cover the cost of collecting debts that have outstretched the recourse period, usually reflected as a percentage of the outstanding amount. This enables funders to cover their administration cost on overdue accounts, whilst charging a lower cost for those customers who pay quicker and are thus representing the funder and their client alike with a lower level of risk.
RefinanceRepaying an existing loan using a new loan that is typically on better terms (possibly with a new lender) which may be more effective for the business in the long-term.
Residual IncomeIncome that an investment can earn over the minimum rate of return.
Residual valueThe value of an asset following a lease period.
RestructureAltering the business’ structure through downsizing and reviewing the current funding facilities to meet its financial requirements, or to adapt to changes in the marketplace.
Return On Equity (ROE)A measure of profitability that calculates how many dollars of profit a company generates with each dollar of a shareholders equity.
Return On Investment (ROI)A measure of profitability represented as a company’s ratio of net income to its equity capital.
RevenueThe amount of money a company receives during a specific period of time.
RiskThe probability that the actual return on an investment will be lower than the anticipated return.
Risk ManagementThe practice of identifying potential risks in advance and taking precautionary steps to reduce the risks.
S
- Sale and leaseback
Selling commercial property (can include assets) to a financier who will then lease it back over a fixed period in return for regular payments, plus interest, to release capital to boost the client’s cash flow.
Sales And Purchase Agreement (SPA)An agreement that finalizes all terms and conditions in the buying/selling of a company and/or property.
Sales Comparison Approach (SCA)An appraisal method whereby a market price of a property is estimated based on sales of similar properties in the area.
Satisfaction of MortgageA legal document indicating that a mortgage has been paid in full.
Secondary Mortgage MarketThe market where home loans and servicing rights are bought and sold between lenders and investors.
Senior DebtDebt that has higher priority to be repaid than other debt.
Service feeThe price charged by an invoice finance provider for its services, typically expressed as a percentage of turnover. This will typically be higher through a factoring facility than with an invoice discounting service.
Shareholders' EquityA company’s total assets minus its total liabilities.
SharesShares are systems of possession. The portion of possession relies on the variety of shares provided. In other words, a unit of ownership in a corporation or financial asset.
Short SaleA sale of real estate for an amount that is less than the amount owed on the property.
Short-Term DebtAny debt incurred by a company that is due within one year.
Shovel ReadyThe stage of a project where work can begin.
Startup CapitalMoney that is necessary to start a new business.
Stated ValueAn arbitrary monetary value that is assigned to a stock for accounting purposes. It is not related to market value.
Strategic Joint VentureA business agreement between two companies to work together to achieve specific goals.
Structured Investment Vehicle (SIV)A pool of investment assets that attempt to benefit financially from credit spreads between short term debt and long term financing.
Subordinate FinancingA second mortgage on a property that is not paid off when the first mortgage is refinanced.
Subordination AgreementA formal agreement that states one party’s claim or interest is inferior to that of another party.
Subprime BorrowerAn individual with less than perfect credit.
Subprime CreditBorrowing subprime debt or loans made to those with less than perfect credit or short credit histories.
Subprime MortgageA mortgage issued to individuals who are often not qualified. These types of mortgages have an interest rate higher than most mortgages.
SurchargeA fee or charge that is added to the normal cost of goods or services.
Sweet SpotThe point at which something provides the optimal balance of costs and benefits in business.
T
- Take-on
The initial process whereby the invoice finance provider uploads its client’s sales ledger information onto their system.
Take-on debtsThe sales ledger value that the invoice finance provider will be taking on at the commencement of the facility.
Take-Out LenderAn investor that makes a long term loan at a certain date in the future.
Tax LienA lien on a tax payer’s property stemming from non-payment of income, property, or other taxes. Tax liens take precedence over all other liens on a property.
Tenancy by the EntiretyA type of ownership of property by husband and wife which allows spouses to own property together as a single entity.
Tenancy in CommonJoint ownership of property by two or more entities in equal or unequal parts.
Tenants In Common (TIC)Parties who jointly own property in equal or unequal parts.
Term SheetA non-binding agreement that sets forth basic terms and conditions of an investment usually in bullet point format. It is used to develop more detailed binding agreements.
Third PartyA person who is not a party to an agreement, but might be affected by the agreement.
Trade financeA funding solution to help businesses overcome the difficulties associated with overseas trading, particularly assisting those that primarily operate in the import and export markets. It provides funding to purchase raw materials and goods from abroad whilst ensuring payment is received for the client’s goods and services, maintaining their healthy cash flow.
TurnaroundA fast, effective and positive change in a company’s performance levels after an intensive care management strategy is employed.
U
- Underwriter
In the securities industry, an underwriter is a company that helps companies introduce new securities to the market. OR In the insurance industry, an underwriter is a person or entity who is liable for insured losses in return for a fee.
V
- Vacancy Rate
The number of units in a building without renters, expressed as a percentage of all units. It is the opposite of occupancy rate.
VATValue Added Tax is included to the online sales of products and also services and is deliberately put on the customer bill. It is normally billed on many company purchases in the UK; however, it could likewise have an effect on products imported from various other nations.
Venture capitalThe cash a venture capitalist injects into a business in return for a proportion of its shares to boost its cash flow, helping it to grow, whilst additionally providing expertise on running it.
Virtual OfficeThe Virtual Office allows your company to have an address in London, Manchester, Geneva, or Hong Kong and to receive mail there, which, in some cases, can lend more credibility to your company.
Voting SharesShares of stock that allow the owner to vote on company matters.
W
- Warehouse Financing
An inventory financing arrangement whereby a manufacturer assigns its goods as collateral to be controlled by a third party on behalf of the lending institution.
WarrantyA legally binding assurance that a good or service is as represented and, if not, will be replaced or repaired.
Warranty DeedA deed that guarantees clear title to the purchaser of real property.
Wholesale MoneyFunds borrowed by financial institutions in large quantities.
Window of OpportunityA short time period during which an opportunity must be taken advantage of or lost.
Working capitalThe immediate cash a company has available to spend on assets and its day-to-day operations. This is calculated by deducting current liabilities from current assets.
Working CapitalThe difference between a company’s current assets and their current liabilities.
Working capital managementThe process of managing a company’s cash flow to ensure its immediate ability to trade isn’t compromised.