Entrepreneurial Small Business Chapter 14 Small Business Finance: Using Equity, Debt and Gifts

corporation

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

debt

A legal obligation to pay money in the future

financial leverage

A measure of the amount of debt relative to total investment

foundation

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

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.

accredited investor

Any person who comes within any of the following categories, or who the issuer reasonably believes comes within any of the following categories, at the time of the sale of the securities to that person: banks, business development companies, companies worth more than 5 million, and executive of the firm making the offering or and individual with a personal net worth of more than 1 million

gift capital

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

debt capital

Money borrowed for the purpose of investment in a business

small business investment company (SBIC)

Private business that is authorized to make SBA-insured loans to start-up and small businesses

SaaS

Stands for Software as a Service and refers to an internet based program that you would use in work or leisure you pay to access software over the Internet. These are paid for by time frame, project, or some measure of usage

gain on investment

The percentage amount that the payout of an investment differs from original cost Calculated as (payout − investment + dividends)/ investment.

Fair Credit Reporting Act (FCRA)

U.S. federal legislation specifying consumer rights vis-a-vis credit reporting agencies

credit reporting agency (CRA)

a business that collects, collates, and reports information concerning an entity's use of debt

interest

a charge for the use of money usually figured as a percentage of the principle

tax credit

a direct reduction in the amount of taxes that must be paid; dependent on meeting some legal criteria

Limited Liability Company (LLC)

a legal form of business organization that is created by filing required documentation with a state government. they have a choice, under federal tax law, of being taxed as other corporations or partnerships

Tax Abatement

a legal reduction intakes by the government

financial management

a set of theories and techniques used to optimize the receipt and use of capital assets

microlender

are SBA-approved partners who offer 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

grant

gift of money made to a business for a specific purpose

unsecured debt

loans that do not allow the lender to seize specific assets one the events of nonpayment

equity capital

money contributed to the businesses in return for part ownership of the business

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

dividends

payments of profits to the owners of corporations

harvest

recover value through a sale of a firm or its assets

collateral

something of value given or pledged as security for payment of a loan; may consists of financial instruments such as stocks, bonds, and negotiable paper, or of physical goods such as trucks, machinery, land or building

weighted average cost of capital (WAC)

the expected average future cost of funds

risk

the level of probability that an investment will not produce expected gains

optimum capital structure

the ratio of debt to equity that provides the maximum level of profits

diversity

to invest in multiple investments of differing risk profiles for the purpose of reducing overall investment risks

partnership

two or more people cooperating to conduct a business enterprise

bootstrapping

using low-cost or free techniques to minimize your cost of doing business

angel investor

a wealthy individual who invests money in companies in relatively early stages of development.

accelerator

an organization that supports start-up s, typically of a particular type with a financial investment, free or inexpensive office space, a variety of free or low-cost support services, and other resources.

sophisticated investor

as defined by the SEC, people who have "sufficient knowledge and experience in financial and business matters to make them capable of evaluating the merits and risks of the prospective investments.

secured debt

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

profit (profitability)

the amount that revenues exceed expenses

financial risk

uncertainty of return; the probability of losing money

gift

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

cost of capital

the percentage cost of obtaining future funds