Chapter 12
prime rate (base rate)
the interest rate charged by commercial banks on loans to their most creditworthy customers .
libor (london interbank offered rate)
the interest rate charged by london banks on loans to other london banks
initial public offerings (IPO)
the issuance of stock to be traded in public financial markets
crowdfunding
the process of raising very small investments from a large number of investors via the internet
private placement
the sale of a firm's capital stock to select individuals.
line of credit
an informal agreement between a borrower and a bank as to the maximum amount of funds the bank will provide at any one time.
equipment loan
an installment loan from a seller of machinery used by a business
certified development company (CDA 504 loan program
an sba loan program that provides long term financing for small business to acquire real estate or machinery and equipment
7(m) microloan program
an sba loan program that provides short-term loans of up to 50,000 to small businesses and not for profit child care centers.
small business innovative research (SBIR) program
an sba program that helps to finance companies that plan to transform laboratory research into marketable products.
loan covenants
bank imposed restrictions on a borrower that enhance the chance of timely repayment
term loan
money loaned for 5 to 10 years term, corresponding to the length of time the investment will bring in profits
factoring
obtaining cash by selling accounts receivable to another firm
purchasing-order financing
obtaining cash from a lender who, for a fee, advances the amount of the borrow's cost of goods sold for specific customer order
business angels
private individuals who invest in other's entrepreneurial ventures
small business investment companies (SMICs)
privately owned banks regulated by the sba, that provides long term loans and/or equity capital to small business
basis point
1/100th of 1 percent when quoting an interest rate
community based financial institution
a lender that uses funds from federal, state, and private sources to provide financing to small businesses in low income communities
asset based loan
a line of credit secured by working capital assets
chattel mortgage
a loan for which items of inventory or other movable property serve as collateral
7(a) loan guaranty program
a loan program that helps small companies obtain financing through a guaranty provided by the sba
real estate mortgage
a long term loan with real property held as collateral.
balloon payment
a very large payment required about halfway through the term over which payments were calculated, repaying the loan balance in full
informal venture capital
funds provided by wealthy private individuals to high risk ventures.
formal venture capitalist
individuals who form limited partnerships for the purpose of raising ventures capital from large institutional investors.