Small Business Management

fair credit reporting act

Fair Credit Reporting Act (FCRA) U.S. federal legislation specifying consumers' rights vis-à-vis credit reporting agencies.

accelerator

accelerator An organization that supports start-ups, typically of a particular type (e.g., Internet, biotech, fashion, sports, women-owned firms) with a financial investment, free or inexpensive office space, mentoring, a variety of free or low-cost support services, and other resources.

Angel Investors

angel investor A wealthy individual who invests in companies in relatively early stages of development.

bootstrapping

bootstrapping Using low-cost or free techniques to minimize your cost of doing business.

collateral

collateral Something of value given or pledged as security for payment of a loan; collateral may consist of financial instruments, such as stocks, bonds, and negotiable paper, or of physical goods, such as trucks, machinery, land, or buildings.

community development organization

community development organization An organization authorized by the SBA to make insured loans to small businesses that are expected to increase economic activity within a specific geographic area.

corporatioin

corporation A legal "artificial" entity that is formed by filing specific documents with a state government.

cost of capital

cost of capital The percentage cost of obtaining future funds.

credit reporting agency

credit reporting agency (CRA) A business that collects, collates, and reports information concerning an entity's use of debt.

debt

debt A legal obligation to pay money in the future.

debt capital

debt capital Money borrowed for the purposes of investment in a business.

diversity

diversify To invest in multiple investments of differing risk profiles for the purpose of reducing overall investment risk.

dividends

dividends Payments of profits to the owners of corporations.

equity capital

equity capital Money contributed to the businesses in return for part ownership of the business.

financial leverage

financial leverage A measure of the amount of debt relative to total investment.

financial management

financial management A set of theories and techniques used to optimize the receipt and use of capital assets.

financial risk

financial risk Uncertainty of returns; the probability of losing money.

foundation

foundation An institution to which private wealth is contributed and from which private wealth is distributed for public purposes.

gain on investment

gain on investment The percentage amount that the payout of an investment differs from original cost calculated as: (Payout - Investment + Dividends)/Investment.

gift

gift Valuable assets or services donated to the business without any obligation to repay or give up any ownership interest.

gift capital

gift capital Capital resources that neither provide any ownership nor require any repayment to the giver.

grant

grant Gift of money made to a business for a specific purpose.

harvest

harvest Recover value through a sale of a firm or its assets.

interest

interest A charge for the use of money, usually figured as a percentage of the principal.

limited liability company

limited liability company (LLC) A legal form of business organization that is created by filing required documentation with a state government. LLCs have a choice, under federal tax law, of being taxed as either corporations or partnerships.

microlender

microlender SBA-approved partner that offers SBA-guaranteed microloans to eligible small businesses. These loans require much less paperwork than regular SBA or bank loans, and are for amounts under $50,000.

optimum capital structure

optimum capital structure The ratio of debt to equity that provides the maximum level of profits.

outside equity

outside equity Money from selling part of your business to people who are not and will not be involved in the management of the business.

partnership

partnership Two or more people cooperating to conduct a business enterprise.

profit, profitablility

profit, profitability The amount that revenues exceed expenses.

risk

risk The level of probability that an investment will not produce expected gains.

royalty financing

royalty financing A method of raising capital financing where investors provide money to a business in return for a guaranteed percentage of revenues.

secured debt

secured debt Loans that provide the lender with the legal right to seize specific assets in the event of nonpayment. Most automobile loans are secured debt and if you don't make your payments, your car will be repossessed.

small business investment company

small business investment company (SBIC) Private business that is authorized to make SBA-insured loans to start-ups and small businesses.

tax credit

tax credit Direct reduction in the amount of taxes that must be paid, dependent on meeting some legal criteria.

unsecured debt

unsecured debt Loans that do not allow a lender to seize specific assets in the event of nonpayment.

weighted average cost of capital

weighted average cost of capital (WAC) The expected average future cost of funds.