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 Financing

Using 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 Financing

The type of funding that is obtained by a business for the purpose of buying another business.

Acquisitions

The process where one business purchases the shares and assets of another, ultimately taking control of that company.

Advance rate

Expressed 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 report

A report, usually generated from the invoice date, summarising the outstanding balances for each of the client’s debtors over a specific period.

Annual Return

An 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.

Apostille

An 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.

Appraisal

Impartial analysis and evaluation conducted in accordance with established criteria to determine the value of something.

Appraisal Approach

The 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 debt

The debts the invoice finance company are prepared to fund or purchase.

Articles of Incorporation

A legal document filed with a government body that creates a corporation.

Assessment

The 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 Finance

A business loan secured whereby the asset being bought is used as collateral.

Asset-Based Lending

A funding solution that releases cash against assets on a business’ balance sheet, including property, plant, machinery, stock and debtors.

Assets

Anything that a company owns with a residual monetary value.

Assignment of debt

The 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 businesses

Any 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 Loan

A 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 Mortgage

A mortgage which does not fully amortize over he term of the note, leaving a balance due at maturity.

Balloon Option

An option contract where the strike price increases by a certain ratio after the price of the underlying asset reaches a predetermined amount.

Balloon Payment

A 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 Guarantee

A promise from a bank or lending institution that if a borrower defaults on a loan, the bank will cover the loss.

Bilateral Contract

An agreement between two parties that contains a promise by each party to fulfill certain obligations to fulfill it.

Bill of Sale

A document that transfers ownership of a asset from one party to another.

Bills Payable

A document that shows the amount owed for goods or services received on credit.

Blanket Mortgage

A mortgage that is used to fund the purchase of more than one piece of property.

Brick and Mortar

A term used to describe a business that operates in a building rather than virtually or online.

Bridge Financing

A short term loan advanced to cover the period between the termination of one loan and the beginning of another.

Bridge Insurance

Insurance that covers damage to bridges.

Bridge Loan

A short term loan advanced to cover the period between the termination of one loan and the beginning of another.

Broker

A person who acts as an agent for others, as in negotiating contracts, purchases, or sales in return for a fee or commission.

Building Permits

Formal approval of building plans by the designated government agency as meeting the requirement of prescribed codes.

Business Asset

A piece of property or equipment purchased for business use.

Business Exit Strategy

The method by which a business owner intends to get out of an investment.

Business Expenses

An expense incurred in the course of business.

Business Guarantee

An 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 Insurance

Insurance 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 Rate

The interest rate used to calculate the present value of a number of future payments.

Cash flow

A 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 finance

Any 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 Statement

A 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 Statement

A financial statement outlining a company’s financial activities that has been prepared by a Certified Public Accountant (CPA).

Chapter 10

A 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 11

A 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 12

A chapter of the United States bankruptcy code which states a type of bankruptcy that may be filed by family farmers or family fisherman.

Chapter 13

A chapter of the United States bankruptcy code under which individuals may attempt to restructure their finances in order to repay their debts.

Chapter 15

A 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 7

A chapter of the United States bankruptcy code under which companies and individuals liquidate their assets in order to repay their debts.

Chapter 9

A chapter of the United States bankruptcy code available exclusively to municipalities, that assists them in restructuring of their debts.

Chattel

An item of property other than real estate.

Chattel Mortgage

A mortgage that provides for a security interest in assets other than real estate to secure the loan.

Closing Costs

The expenses associated with buying real estate.

Collateral

An item of value that is pledged to guarantee repayment of a loan.

Collateralization

When 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) Loan

A 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 mortgages

A 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 Loan

A loan secured with commercial rather than residential property.

Concentration

The 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 Bond

Form of surety bond specific to construction that guarantees the performance of the builder according to project specifications.

Construction Lien

A lien that provides builders and contractors legal recourse to get paid for work and materials purchased for a project.

Construction Loan

A short term loan used to finance the construction of a home.

Construction Mortgage

A short term loan used to finance the construction of a home.

Contra-trading

A relationship whereby a business buys and sells products to and from the same customer.

Cost of funds

The 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 insurance

Trade 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 limit

Designated limit assigned by an Insurer. Also, the amount of credit a client is prepared to extend to any of its customers

Credit management

A term used to describe a company’s management of its accounts receivable.

Current account

he 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 assets

Any 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 / EBITDA

The ratio of a company’s ability to pay off its incurred debt.

Debt / Equity Ratio

A measure of the ratio between a company’s assets provided by creditors to assets provided by shareholders.

Debt collection

The 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 Consolidation

The combining of several debts into a single, more favorable loan.

Debt finance

Corporate finance facilities where the client borrows money such as loans, bonds, mortgages or overdraft agreements.

Debt Restructuring

The restructuring of the terms of a loan to a company in order to avoid default on payments.

Debt-To-Capital Ratio

The ratio of a company’s total debt compared to its total capital, its debt and equity combined.

Debtor protection

Debtor 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 Foreclosure

A 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.

Default

The failure by a company to pay its legal obligations of debt repayment when due.

Default Judgment

A binding judgement in favor of a party based on a failure to act by the other party.

Default Risk

The risk that a company will be unable to make necessary payments on their obligations in a timely manner.

Deficiency Judgment

A judgment against a borrower whose mortgage foreclosure sale did not produce enough funds to repay the loan in full.

Dilution

The ratio of credit notes issued by the client to invoices. This also accounts for write-offs and reassignments.

Direct lease

A funder purchases an asset on a business’ behalf before leasing it to the client in return for regular payments, plus interest.

Director

Directors 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 discounting

An 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 charge

The 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.

EBITA

Refers to a company’s earnings before the deduction of interest, taxes and amortization expenses.

EBITDA-To-Interest Coverage Ratio

A ratio used in accessing a company’s financial staying power by determining if it is profitable enough to pay off its interest expenses.

Economic life

The period within which an asset has an economic value and is efficiently functional.

Equity

The value of an ownership interest in property, including shareholders’ equity in their business.

Equity Finance

Equity finance helps businesses to achieve their growth objectives by raising capital from external investors in return for a share of your business.

Equity Participation

Ownership shares in a company or property.

Escrow Agent

A 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 Agreement

An 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 Strategy

A predetermined plan for an owner to exit their business.

Export debts

Debts accrued from the sale of goods and services to overseas customers who can be invoiced in either sterling or another currency.

Extrinsic Value

The 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.

Factoring

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. There is also the additional option of a non-recourse facility that incorporates debtor protection, thus protecting the client from debtor non-payment.

Factoring charge

The 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 company

A lender that releases funding against a business’ accounts receivable while additionally providing a dedicated sales ledger management service.

Fair Market Value

The price at which an asset is sold and bought in the open market.

Feasibility Study

An assessment of the ability to complete a proposed project.

Fiduciary

A person who has the power or obligation to act for another.

Finance

Corporate funding provided through the purchase of assets in return for a security interest.

Financial Analysis

The conversion of financial data into useful information for decision making about a company.

Fixed assets

Assets owned by the business that are unlikely to be quickly converted into cash, including property, fixed machinery, fixtures and fittings.

Full Recourse Debt

Is a debt that the borrower is responsible for repaying regardless of circumstances such as loss of job or illness.

Full service factoring

Also 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 Payment

The 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 Estimate

States all the costs associated with a mortgage. It provides a borrower with information needed in order to select a mortgage.

Gross Earnings

A company’s income before taxes and deductions.

Gross Profit

A company’s profit after deducting expenses associated with making or selling its products.

Gross Sales

A 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 Money

Currency 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 Fund

Private 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 Cost

The original cost of an asset at the time of purchase.

Holding Company

A company that controls other companies through stock ownership but does not typically engage directly in their operations.

Hypothecation

To 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 Approach

A method of determining the appraisal value of a property on the basis of its opportunity cost.

Income Property

Real estate purchased for the purpose of generating income.

Income Property Mortgage

A loan given to purchase rental property.

Independent Auditor

A certified public accountant from an outside accounting firm who examines financial records of a company.

Industrial Park

An area designed and zoned for industrial use.

Ineligibles

The 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 Flow

The initial investment that is paid into a project at the beginning.

Insufficient Funds

A situation where sufficient funds are not available in an account to cover a demand of payment.

Interest Rate

A rate at which interest is paid by a borrower for the use of money borrowed from a lender.

International Investing

When a company or individual from one nation invests in assets of a company based in another nation.

Inventory Financing

A loan made to a company using its inventory as collateral.

Investor

An investor is the proprietor of a firm restricted by shares.

Invoice discounting

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. 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 finance

A 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 Financing

A 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 Foreclosure

A foreclosure that goes through the court system.

Junior Mortgage

A second (or third or fourth) mortgage on the same property.

L

Land Contract

A written legal agreement used to purchase real estate.

Land Lease Option

a) 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..

Lease

A 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 Option

A type of contract in which a tenant is given the right purchase the leased property under certain circumstances.

Lease rate

The 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 Own

A 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.

Lessee

The Company who rents an asset from a financier in return for regular payments.

Lessor

The 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 Comfort

A letter indicating a willingness from one party to another to enter into a contract.

Letter Of Credit

A 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.

Liability

A legally binding obligation payable to another entity.

Licensing Agreement

A legal contract between two parties in which the contractual owner of the property gives permission to another to use that property.

Lien

A legal claim against an asset which is used to secure a loan and which must be paid when the property is sold.

Limited Liability Partnership

LLP 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 Asset

An asset that can be converted into cash quickly with little or no loss in value.

Lis Pendens

A written notice that a lawsuit regarding the title to real property or some interest in that property has been filed.

Loan Application Fee

A fee charged to process an application for a loan.

Loan Commitment

Assurance by a lender to make money available to a borrower.

Loan Committee

A committee that reviews and either approves or rejects a loan application that the initial loan officer does not have authority to approve.

Loan Loss Provision

A 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 Carryback

When 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 Approach

A 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 Lease

Via a contractual arrangement, additional assets are able to be leased keeping the same terms and conditions, without having to renegotiate the contract.

Master Mortgage

A 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 Lien

A guarantee of payment to builders or contractors for the monies owed to them.

Meeting Of The Minds

When the parties to an agreement all have the same understanding of the terms of the agreement.

Merger

The 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 finance

Mezzanine 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 Banker

A company or individual that originates mortgages.

Mortgage Bankers Association (MBA)

The national association that represents the real estate finance industry.

Mortgage Broker

A company or individual that places mortgage loans with lenders but does not originate the loan.

Mortgage Modification

A 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 Loss

A 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 capital

The cash available to a business to spend, calculated by working out its current assets less its current liabilities.

Net Worth

A 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 Director

The 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 Shareholder

The 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 facility

An 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 Finance

A 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.

Notarisation

The 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 Mortgage

A 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 Expense

Expenses 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.

Option

A 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 Contract

An agreement between parties that is partly or entirely dependent on spoken words.

Out-Of-Pocket Expenses

An 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-payment

Where 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.

Overcapitalization

A 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.

Overhead

Ongoing operational expenses incurred by a business.

Owner Financing

Financing where the buyer borrows from the seller instead of, or in addition to, a bank.

Owner-Occupant

A 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-passu

Equal in all respects.

Partial Release

Is a provision in some mortgage contracts that allows the borrower to exclude some of the collateral from the mortgage contract.

Perfect Title

A title that is clear and free from any liens attached to it.

Perfected Lien

Security interest in the collateral securing a debt that is protected from third party claims.

Performance Appraisal

An annual employee review to evaluate an employee’s overall job performance.

Performance Bond

A 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 Statement

A document or spreadsheet that details personal assets and liabilities without including any business related assets or liabilities.

Personal Guarantee

An agreement that makes you liable for your own or a third party’s debts or obligations.

Personal Income

An individual’s total earnings during a given period.

Personal Property

Personal possessions, other than real estate or buildings. Personal property is movable and includes tangible and intangible items.

Piggyback Mortgage

A 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%.

PIPE

Private Investment in Public Equity

Pipeline

An investment company whose purpose is to collect investment funds from a group of individual investors and invest them in financial securities.

Placement

The 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 Insurance

A 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 Funds

A unit trust in which an investor contributes funds that are then invested by a third party.

Portfolio Income

Income derived from various types of investments and includes capital gains, interest, dividends and royalties.

Portfolio Investment

Investment in securities simply for financial gain without creating long term interest in, or management control of, the organization.

Portfolio Manager

The 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 Reinsurance

Reinsurance whereby the reinsurer takes on a portion of the ceding insurer’s entire portfolio.

Power of Attorney

A legal document appointing another person to make decisions on your behalf.

Power of Attorney of Property

A legal document that transfers the legal right to manage property to the attorney in the event an individual is unable to do so.

Pre-Approval

An 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 Expense

Expenses that are paid in advance of actually incurring them such as rent or insurance.

Prepaid Finance Charge

Charges made in connection with a loan that must be paid by the borrower at the time of close of the loan.

Prepaid Insurance

Payment made in advance for insurance services that are to be provided over a specified period of time.

Prepaid Interest

Interest on a loan that is paid in advance of the time it is earned by the borrower.

Prepayment

To pay a debt in full before its official due date.

Prepayment Penalty

An additional fee imposed by a lender when a loan is paid in full before its official due date.

Prime Borrower

Someone who is considered to have below average credit risk.

Prime Rate

The best available interest rate under most circumstances. It is used as a benchmark for interest rates on business and consumer loans.

Prior Lien

A lien on an asset that has priority over other liens attached to the same property.

Private Company

A company whose ownership is private.

Private Equity

Investment 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 Placement

The sale of a security directly to a limited number of investors. It is not offered to the public.

Privatization

The process of transferring an enterprise from the public sector to the private sector.

Pro Forma

A financial projection based on assumptions.

Pro-Forma Forecast

A financial forecast based on pro forma income statements.

Production Cost

Costs related to making or acquiring goods or services that directly generate revenue for an organization.

Profit

Funds 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 Ratio

Overall measurement of the profitability of a trading system.

Project Finance

A type of financing where project debt and equity used to finance a project are repaid from the funds generated by the project.

Project Management

The application of processes, methods, knowledge, skills and experience used to achieve a project’s objectives.

Promissory Note

A 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 Lien

A claim against property of someone who owes money.

Property Management

The operation, control and oversight of residential, commercial and/or industrial real estate.

Property tax

A tax assessed on the market value of real and personal property.

Public Company

A company whose shares are traded on a stock exchange.

Purchase Acquisition

A 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 option

An 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 Price

The price at which property is purchased.

Purchase-Money Mortgage

A 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 Appraiser

An individual who has earned an appraisal designation from a recognized professional organization or has met a certain minimum education and experience requirements.

Quarterly Earnings Report

A report made by a public company to report their quarterly performance.

Quick Liquidity Ratio

The total amount of a company’s quick assets divided by the sum of its net liabilities.

Quorum

The 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 Estate

Land as well as any physical property attached to it.

Real Estate Short Sale

A sale of real estate for an amount that is less than the amount owed on the property.

Reassignment

A debt that has been returned to the client from its funder.

Receivables

An amount due to a company by a customer, supplier or any other party.

Reconciliation

Matching 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.

Reconciliation

The 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 facility

An 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 period

The 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 fee

A 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.

Refinance

Repaying 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 Income

Income that an investment can earn over the minimum rate of return.

Residual value

The value of an asset following a lease period.

Restructure

Altering 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.

Revenue

The amount of money a company receives during a specific period of time.

Risk

The probability that the actual return on an investment will be lower than the anticipated return.

Risk Management

The 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 Mortgage

A legal document indicating that a mortgage has been paid in full.

Secondary Mortgage Market

The market where home loans and servicing rights are bought and sold between lenders and investors.

Senior Debt

Debt that has higher priority to be repaid than other debt.

Service fee

The 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' Equity

A company’s total assets minus its total liabilities.

Shares

Shares 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 Sale

A sale of real estate for an amount that is less than the amount owed on the property.

Short-Term Debt

Any debt incurred by a company that is due within one year.

Shovel Ready

The stage of a project where work can begin.

Startup Capital

Money that is necessary to start a new business.

Stated Value

An arbitrary monetary value that is assigned to a stock for accounting purposes. It is not related to market value.

Strategic Joint Venture

A 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 Financing

A second mortgage on a property that is not paid off when the first mortgage is refinanced.

Subordination Agreement

A formal agreement that states one party’s claim or interest is inferior to that of another party.

Subprime Borrower

An individual with less than perfect credit.

Subprime Credit

Borrowing subprime debt or loans made to those with less than perfect credit or short credit histories.

Subprime Mortgage

A mortgage issued to individuals who are often not qualified. These types of mortgages have an interest rate higher than most mortgages.

Surcharge

A fee or charge that is added to the normal cost of goods or services.

Sweet Spot

The 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 debts

The sales ledger value that the invoice finance provider will be taking on at the commencement of the facility.

Take-Out Lender

An investor that makes a long term loan at a certain date in the future.

Tax Lien

A 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 Entirety

A type of ownership of property by husband and wife which allows spouses to own property together as a single entity.

Tenancy in Common

Joint 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 Sheet

A 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 Party

A person who is not a party to an agreement, but might be affected by the agreement.

Trade finance

A 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.

Turnaround

A 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.

VAT

Value 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 capital

The 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 Office

The 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 Shares

Shares 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.

Warranty

A legally binding assurance that a good or service is as represented and, if not, will be replaced or repaired.

Warranty Deed

A deed that guarantees clear title to the purchaser of real property.

Wholesale Money

Funds borrowed by financial institutions in large quantities.

Window of Opportunity

A short time period during which an opportunity must be taken advantage of or lost.

Working capital

The 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 Capital

The difference between a company’s current assets and their current liabilities.

Working capital management

The process of managing a company’s cash flow to ensure its immediate ability to trade isn’t compromised.