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ACCOUNTS PAYABLE
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Trade accounts of businesses representing obligations to pay for goods and services received.
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ACCOUNTS RECEIVABLE
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Trade accounts of businesses representing moneys due for goods sold or services rendered evidenced by notes,
statements, invoices or other written evidence of a present obligation.
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ACCOUNTING
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The recording, classifying, summarizing and interpreting in a significant manner and in terms of money,
transactions and events of a financial character.
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ASSUMPTIONS
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The act of assuming/undertaking another's debts or obligations.
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AUCTION
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A public sale of goods to the highest bidder.
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AUTOMATIC DATA PROCESSING
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- Data processing largely performed by automatic means.
- The discipline which deals with methods and techniques of automatic data processing.
- Pertaining to data processing equipment such as electrical accounting machines and electronic data processing
equipment.
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BANKRUPTCY
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A condition in which a business cannot meet its debt obligations and petitions a
federal district court for either reorganization of its debts or liquidation of its assets. In the action the
property of a debtor is taken over by a receiver or trustee in bankruptcy for the benefit of the creditors. This
action is conducted as prescribed by the National Bankruptcy Act, and may be voluntary or involuntary.
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BREAK-EVEN POINT
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The break-even point in any business is that point at which the volume of sales or revenues exactly equals total
expenses -- the point at which there is neither a profit nor loss -- under varying levels of activity. The
break-even point tells the manager what level of output or activity is required before the firm can make a
profit; reflects the relationship between costs, volume and profits.
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BUSINESS BIRTH
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Formation of a new establishment or enterprise.
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BUSINESS DEATH
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Voluntary or involuntary closure of a firm or establishment.
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BUSINESS DISSOLUTION
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For enumeration purposes, the absence from any current record of a
business that was present in a prior time period.
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BUSINESS FAILURE
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The closure of a business causing a loss to at least one creditor.
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BUSINESS PLAN
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A comprehensive planning document which clearly describes the business developmental objective of an existing or
proposed business applying for assistance in SBA's 8(a) or lending Programs. The plan outlines what and how and
from where the resources needed to accomplish the objective will be obtained and utilized.
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BUSINESS START
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For enumeration purposes, a business with a name or similar designation that
did not exist in a prior time period.
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CANCELED LOAN
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The annulment or recission of an approved loan prior to disbursement.
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CAPITAL
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-
Assets less liabilities, representing the ownership interest in a business;
- a stock of accumulated goods, especially at a specified time and in contrast to income received during a
specified time period;
- accumulated goods devoted to the production of goods; (4) accumulated possessions calculated to bring income.
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CAPITAL EXPENDITURES
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Business spending on additional plant equipment and inventory.
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CAPITALIZED PROPERTY
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Personal property of the agency which has an average dollar value of
$300.00 or more and a life expectancy of one year or more. Capitalized property shall be depreciated annually
over the expected useful life to the agency.
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CASH DISCOUNT
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An incentive offered by the seller to encourage the buyer to pay within a stipulated time. For example, if the
terms are 2/10/N 30, the buyer may deduct 2 percent from the amount of the invoice (if paid within 10 days)
otherwise, the full amount is due in 30 days.
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CASH FLOW
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An accounting presentation showing how much of the cash generated by the business remains after both expenses
(including interest) and principal repayment on financing are paid. A projected cash flow statement indicates
whether the business will have cash to pay its expenses, loans, and make a profit. Cash flows can be calculated
for any given period of time, normally done on a monthly basis.
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CHARACTER
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A letter, digit, or other symbol, that is a part of the organization, control, or
representation of data used in computer systems.
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CHARGE-OFF
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An accounting transaction removing an uncollectible balance from the active receivable accounts.
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CHARGED OFF LOAN
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An uncollectible loan for which the principal and accrued interest were removed from the receivable accounts.
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CLOSING
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Actions and procedures required to effect the documentation and disbursement of loan
funds after the application has been approved, and the execution of all required documentation and its filing and
recordation where required.
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CLOSED LOAN
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Any loan for which funds have been disbursed, and all required documentation has been executed, received and
reviewed. For statistical purposes, first or total disbursement is counted as a closed loan.
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COLLATERAL
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Something of value -- securities, evidence of deposit or other property -- pledged to support the repayment of an
obligation.
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COLLATERAL DOCUMENT
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A legal document covering the item(s) pledged as collateral on a loan, i.e., note, mortgages, assignment, etc.
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CONSORTIUM
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A coalition of organizations, such as banks and corporations, set up to fund ventures requiring large capital
resources.
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CORPORATION
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A group of persons granted a state charter legally recognizing them as a separate
entity having its own rights, privileges, and liabilities distinct from those of its members. The process of
incorporating should be completed with the state's secretary of state or state corporate counsel and usually
requires the services of an attorney.
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COMPROMISE
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The settlement of a claim resulting from a defaulted loan for less than the full amount due. Compromise
settlement is a procedure available for use only in instances where the government cannot collect the full amount
due within a reasonable time, by enforced collection proceedings or where the cost of such proceedings would not
justify such effort.
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CONTINGENT LIABILITY
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A potential obligation that may be incurred dependent upon the occurrence of a future event. Two examples are:
(1) the liability of an endorser or guarantor of a note if the primary borrower fails to pay as agreed and (2)
the liability that would be incurred if a pending lawsuit is resolved in the other party's favor.
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COSTS
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Money obligated for goods and services received during a given period of time, regardless of when ordered or
whether paid for.
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CREDIT RATING
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A grade assigned to a business concern to denote the net worth and credit standing to which the concern is
entitled in the opinion of the rating agency as a result of its investigation.
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DATA ELEMENT
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The basic unit of identifiable and definable information. A data element occupies the space provided by fields in
a record or blocks on a form. It has an identifying name and value or values for expressing a specific fact. For
example, a data element named "Color of Eyes" could have recorded values of "Blue (a name)," "Bl (an
abbreviation)," "06 (a code)." Similarly, a data element named "Age of Employee" could have a recorded value of
"28" (a numeric value).
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DEBENTURE
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Debt instrument evidencing the holder's right to receive interest and principal
installments from the named obligor. Applies to all forms of unsecured, long-term debt evidenced by a certificate
of debt.
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DEBT CAPITAL
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Business financing that normally requires periodic interest payments and repayment of the principal within a
specified time.
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DEBT FINANCING
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The provision of long term loans to small business concerns in exchange for debt securities or a note.
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DEED OF TRUST
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A document under seal which, when delivered, transfers a present
interest in property. May be held as collateral.
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DEFAULTS
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The nonpayment of principal and/or interest on the due date as provided by the terms and conditions of the note.
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DEFERRED LOAN
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Loans whose principal and or interest installments are postponed for a specified
period of time.
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DISBURSEMENT
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The actual payout to borrower of loan funds, in whole or part. It may be concurrent with the closing, or follow
it.
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DISBURSING OFFICER
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An employee authorized to pay out cash or issue checks in settlement of vouchers approved by a certifying
officer.
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DIVESTITURE
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Change of ownership and/or control of a business from a majority (non-disadvantaged) to disadvantaged persons.
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EARNING POWER
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The demonstrated ability of a business to earn a profit, over time, while following good accounting practices.
When a business shows a reasonable profit on invested capital after fully maintaining the business property,
appropriately compensating its owner and employees, servicing its obligations, and fully recognizing its costs,
the business may be said to have demonstrated earning power. Demonstrated earning power is the foremost test of
the business risk in pressing upon an application for a loan.
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EASEMENT
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A right or privilege that a person may have on another's land, as the right of a way or ingress or egress.
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EMPLOYEE ASSISTANCE PROGRAM (EAP) COORDINATOR
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Coordinates the activities of Central
Office or regional counselors, maintains a community resource list, of available professional
assistance to troubled employees and a current roster of EAP counselors for the area of
his/her jurisdiction.
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EAP COUNSELOR
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Conducts confidential consultations with troubled employees who so request or who are referred for objective
analysis of a personal problem and for identification of the best available assistance and/or professional
services needed to resolve the employee's problem.
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ENTERPRISE
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Aggregation of all establishments owned by a parent company. An enterprise can
consist of a single, independent establishment or it can include subsidiaries or other branch establishments
under the same ownership and control.
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ENTREPRENEUR
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One who assumes the financial risk of the initiation, operation and management of a given business or
undertaking.
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EQUITY
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An ownership interest in a business.
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EQUITY FINANCING
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The provision of funds for capital or operating expenses in exchange for capital stock, stock purchase warrants
and options in the business financed, without any guaranteed return, but with the opportunity to share in the
company's profits. Equity financing includes long-term subordinated securities containing stock options and/or
warrants. Utilized in SBIC financing activities.
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EQUITY PARTNERSHIP
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A limited partnership arrangement for providing start-up and seed capital to businesses.
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ESCROW ACCOUNTS
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Funds placed in trust with a third party, by a borrower for a specific purpose and to be delivered to the
borrower only upon the fulfillment of certain conditions.
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ESTABLISHMENT
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A single-location business unit, which may be independent -- called a single-
establishment enterprise-- or owned by a parent enterprise.
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FINANCIAL REPORTS
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Reports commonly required from applicants request for financial assistance, e.g.:
- Balance Sheet - A report of the status of a firm's assets, liabilities and owner's equity at a given time.
- Income Statement - A report of revenue and expense which shows the results of business operations or net
income for a specified period of time.
- Cash Flow - A report which analyzes the actual or projected source and disposition of cash during a past or
future accounting period.
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FINANCING
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New funds provided to a business, by either loans or purchase of debt securities or
capital stock.
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FLOW CHART
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A graphical representation for the definition, analysis, or solution of a problem, in
which symbols are used to represent operations, data, flow, equipment, etc.
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FORECLOSURE
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The act by the mortgagee or trustee upon default, in the payment of interest or
principal of a mortgage of enforcing payment of the debt by selling the underlying security.
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FRANCHISING
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A continuing relationship in which the franchisor provides a licensed privilege to the franchisee to do business,
and offers assistance in organizing, training, merchandising, marketing and managing in return for a
consideration. Franchising is a form of business by which the owner (franchisor) of a product, service or method
obtains distribution through affiliated dealers (franchisees). The product, method or service being marketed is
usually identified by the franchisor's brand name, and the holder of the privilege (franchisee) is often given
exclusive access to a defined geographical area.
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GROSS DOMESTIC PRODUCT (GDP)
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The most comprehensive single measure of aggregate economic output. Represents the market value of the total
output of the goods and services produced by a nation's economy.
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GROSS NATIONAL PRODUCT (GNP)
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A measure of a nation's aggregate economic output. Since 1991 GDP, a slightly different calculation, has replaced
GNP as a measure of U.S. economic output.
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GUARANTEED LOAN
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A loan made and serviced by a lending institution under agreement that a
governmental agency will purchase the guaranteed portion if the borrower defaults.
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HARDWARE
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A term used to describe the mechanical, electrical and electronic elements of a data
processing system.
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HAZARD INSURANCE
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Insurance required showing lender as loss payee covering certain risks on real and personal property used for
securing loans.
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INCUBATOR
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A facility designed to encourage entrepreneurship and minimize obstacles to new
business formation and growth, particularly for high technology firms, by housing a number
of fledgling enterprises that share an array of services. These shared services may include
meeting areas, secretarial services, accounting services, research libraries, on-site financial
and management counseling and word processing facilities.
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INDEPENDENT AND QUALIFIED PUBLIC ACCOUNTANTS
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Public accountants are independent
when neither they nor any of their family have a material, direct or indirect financial interest
in the borrower other than as an accountant. They are qualified, unless there is contrary
evidence, when they are either (1) certified, licensed, or otherwise registered if so required
by the state in which they work, or (2) have worked as a public accountant for at least five
years and are accepted by SBA.
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INDUSTRIAL REVENUE BOND (IRB)
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A tax-exempt bond issued by a state or local government agency to finance industrial or commercial projects that
serve a public good. The bond usually is not backed by the full faith and credit of the government that issues
it, but is repaid solely from the revenues of the project and requires a private sector commitment for repayment.
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INNOVATION
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Introduction of a new idea into the marketplace in the form of a new product or
service, or an improvement in organization or process.
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INSOLVENCY
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The inability of a borrower to meet financial obligations as they mature, or having
insufficient assets to pay legal debts.
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INTEREST
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An amount paid a lender for the use of funds.
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INVERSE ORDER OF MATURITY
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When payments are received from borrowers that are larger than the authorized repayment schedules the overpayment
is credited to the final installments of the principal which reduces the maturity of the loan and does not affect
the original repayment schedule.
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INVESTMENT BANKING
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Businesses specializing in the formation of capital. This is done by outright purchase and sale of securities
offered by the issuer, standby underwriting or "best efforts selling."
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INVITATION FOR BIDS
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Formal solicitations for offerings, to perform procurements by competitive bids when the specifications describe
the requirements of the government clearly, accurately, and completely; but avoiding unnecessarily restrictive
specifications or requirements which might unduly limit the number of bidders.
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JOB DESCRIPTION
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A written statement listing the elements of a particular job or occupation, e.g., purpose, duties, equipment
used, qualifications, training, physical and mental demands, working conditions, etc.
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JUDGMENT
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Judicial determination of the existence of an indebtedness, or other legal liability.
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JUDGMENT BY CONFESSION
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The act of debtors permitting judgment to be entered against them for a given sum with a statement to that
effect, without the institution of legal proceedings.
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JUNK BOND
|
A high-yield corporate bond issue with a below-investment rating that became a growing source of corporate
funding in the 1980s.
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LEASE
|
A contract between the owner (lessor) and the tenant (lessee) stating the conditions under which the tenant may
occupy or use the property.
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LEGAL RATE OF INTEREST
|
The maximum rate of interest fixed by the laws of the various states,
which a lender may charge a borrower for the use of money.
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LENDING INSTITUTION
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Any institution, including a commercial bank, savings and loan association, commercial finance company, or other
lender qualified to participate with SBA in the making of loans.
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LEVERAGED BUY-OUT
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The purchase of a business, with financing provided largely by borrowed
money, often in the form of junk bonds.
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LIEN
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A charge upon or security interest in real or personal property maintained to ensure the
satisfaction of a debt or duty ordinarily arising by operation of law.
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LIQUIDATION
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The disposal, at maximum prices, of the collateral securing a loan, and the voluntary
and enforced collection of the remaining loan balance from the obligators and/or guarantors.
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LIQUIDATION VALUE
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The net value realizable in the sale (ordinarily a forced sale) of a business or a particular asset.
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LITIGATION
|
Refers to a loan in "liquidation status" which has been referred attorneys for legal
action. Also: The practice of taking legal action through the judicial process.
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LOAN AGREEMENT
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Agreement to be executed by borrower, containing pertinent terms, conditions, covenants and restrictions.
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LOAN PAYOFF AMOUNT
|
The total amount of money needed to meet a borrower's obligation on a loan. It is arrived at by accruing gross
interest for one day and multiplying this figure by the number of days that exist between the date of the last
repayment and the date on which the loan is to be completely paid off. This amount, known as accrued interest, is
combined with the latest principal and escrow balances that are applicable to what is now referred to as the loan
payoff amount. In the case where prepaid interest exceeds the accrued interest the latter is subtracted from the
former and the difference is used to reduce the total amount owed.
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LOSS RATE
|
A rate developed by comparing the ratio of total loans charged off to the total loans
disbursed from inception of the program to the present date.
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LOSS RESERVE ADJUSTMENT RATE
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A reserve rate based upon the ratio of the aggregate net
chargeoffs (chargeoffs less recoveries) for the most recent five years to the total average
loans outstanding for the comparable 5-year period.
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MARKUP
|
Markup is the difference between invoice cost and selling price. It may be expressed either as a percentage of
the selling price or the cost price and is supposed to cover all the costs of doing business plus a profit.
Whether markup is based on the selling price or the cost price, the base is always equal to 100 percent.
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MATURITY
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As applied to securities and commercial paper, the period end date when payment of
principal is due.
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MATURITY EXTENSIONS
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Extensions of payment beyond the original period established for repayment of a loan.
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MERGER
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A combination of two or more corporations wherein the dominant unit absorbs the passive ones, the former
continuing operation usually under the same name. In a consolidation two units combine and are succeeded by a new
corporation, usually with a new title.
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MORTGAGE
|
An instrument giving legal title to secure the repayment of a loan made by the
mortgagee (lender). In legal contemplation there are two types: (1) title theory - operates as
a transfer of the legal title of the property to the mortgagee, and (2) lien theory - creates a
lien upon the property in favor of the mortgagee.
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NEGOTIATION
|
The "face to face" process used by local unions and the employer to exchange their views on those matters
involving personnel policies and practices, or other matters affecting the working conditions of employees in the
unit and reduced to a written binding agreement. Used also by contracting officers to reach agreement with
potential contractors.
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NEGOTIATION DISPUTE
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That point in negotiations where labor and management cannot come to an agreement on some or all of the issues on
the bargaining table and the services of the FMCS have not been utilized.
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NEGOTIATED GRIEVANCE PROCEDURE
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The sole and exclusive procedure available to all employees in a bargaining unit and the employer for processing
grievances and disputes.
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NET WORTH
|
Property owned (assets), minus debts and obligations owed (liabilities), is the owner's equity (net worth).
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NOTES AND ACCOUNTS RECEIVABLE
|
A secured or unsecured receivable evidenced by a note or
open account arising from activities involving liquidation and disposal of loan collateral.
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OBLIGATIONS
|
Technically defined as "amount of orders placed, contracts awarded, services
received, and similar transactions during a given period which will require payments during
the same or a future period."
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ORDINARY INTEREST
|
Simple interest based on a year of 360 days, contrasting with exact interest having a base year of 365 days.
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OUTLAYS
|
Net disbursements (cash payments in excess of cash receipts) for administrative expenses and for loans and
related costs and expenses (e.g., gross disbursements for loans and expenses minus loan repayments, interest and
fee income collected, and reimbursements received for services performed for other agencies).
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PARTNERSHIP
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A legal relationship existing between two or more persons contractually associated as joint principals in a
business.
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PATENT
|
A patent secures to an inventory the exclusive right to make, use and sell an invention for 17 years. Inventors
should contact the U.S. Department of Commerce Patent Office.
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PRIME RATE
|
Interest rate which is charged business borrowers having the highest credit ratings, for short term borrowing.
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PRO-Net
|
An Internet-based database of information of small, disadvantaged, 8(a) and women-owned businesses seeking
procurement contracts.
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PRODUCT LIABILITY
|
Type of tort or civil liability that applies to product manufacturers and sellers.
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PROFESSIONAL AND TRADE ASSOCIATIONS
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Non-profit, cooperative and voluntary organizations that are designed to help their members in dealing with
problems of mutual interest. In many instances professional and trade associations enter into an agreement with
SBA to provide volunteer counseling to the small business community.
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PROPRIETORSHIP
|
The most common legal form of business ownership; about 85 percent of all small businesses are proprietorships.
The liability of the
owner is unlimited in this form of ownership.
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PROTEST
|
A statement in writing by any bidder or offeror on a particular procurement alleging that another bidder or
offeror on such procurement is not a small business concern.
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RATIO
|
Denotes relationships of items within and between financial statements, e.g., current ratio, quick ratio,
inventory turnover ratio and debt/net worth ratios.
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REQUEST FOR PROPOSALS
|
Solicitations for offerings for competitive negotiated procurements when it is impossible to draft an invitation
for bids containing adequate detailed description of the required property and services. There are 15
circumstances in the Federal Acquisition Regulations (FAR) which permit negotiated procurements.
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RETURN ON INVESTMENT
|
The amount of profit (return) based on the amount of resources (funds) used to produce it. Also, the ability of a
given investment to earn a return for its use.
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SECONDARY MARKET
|
Those who purchase an interest in a loan from an original lender, such as
banks, institutional investors, insurance companies, credit unions and pension funds.
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SCORE, formerly Service Corps of Retired Executives
|
Retired, and working, successful business
persons who volunteer to render assistance in counseling, training and guiding small
business clients.
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SMALL BUSINESS DEVELOPMENT CENTERS (SBDC)
|
The SBDC is a university-based center for the delivery of joint government, academic, and private sector services
for the benefit of small business and the national welfare. It is committed to the development and productivity
of business and the economy in specific geographical regions.
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TURNOVER (Business)
|
Turnover is the number of times that an average inventory of goods is sold during a fiscal year or some
designated period. Care must be taken to ensure that the average inventory and net sales are both reduced to the
same denominator; that is, divide inventory at cost into sales at cost or divide inventory at selling price into
sales at selling price. Do not mix cost price with selling price. The turnover when accurately computed, is one
measure of the efficiency of a business.
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UNDELIVERED ORDERS
|
The amount of orders for goods and services outstanding for which, the
liability has not yet accrued. For practical purposes represents obligations incurred for which
goods have not been delivered or services not performed.
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UNFAIR LABOR PRACTICE
|
Action by either the employer or union which violates the provisions of EO 11491 as amended.
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UNIFORM COMMERCIAL CODE
|
Codification of uniform laws concerning commercial transactions. In SBA parlance generally refers to a uniform
method of recording and enforcing a security interest or charge upon existing or to be acquired personal
property.
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USURY
|
Interest which exceeds the legal rate charged to a borrower for the use of money.
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VENTURE CAPITAL
|
Money used to support new or unusual commercial undertakings; equity, risk or speculative capital. This funding
is provided to new or existing firms that exhibit above-average growth rates, a significant potential for market
expansion and the need for additional financing for business maintenance or expansion.
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WORD PROCESSING
|
Is the efficient and effective production of written communications at the lowest possible cost through the
combined use of systems management procedures, automated technology, and accomplished personnel. The equipment
used in word processing applications includes but is not limited to the following: Dictation and transcription
equipment, automatic repetitive typewriters, visual display text editing typewriters, keyboard terminals, etc.
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WORKERS' COMPENSATION
|
A state-mandated form of insurance covering workers injured in job-
related accidents. In some states the state is the insurer; in other states insurance must be
acquired from commercial insurance firms. Insurance rates are based on a number of factors
including salaries, firm history and risk of occupation.
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