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Small Business Glossary of Terms

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504 Loan Program
Includes a loan secured with a senior lien from a private-sector lender covering up to 50% of the project cost, a loan secured with a junior lien from the Certified Development Company (backed by a 100% SBA-guaranteed debenture) covering up to 40% of the cost, and a contribution of at least 10% equity from the business being helped

7(a) Loan Guaranty Program
The 7(a) Loan Guaranty Program is one of SBA's primary lending programs. It provides loans to small businesses unable to secure financing on reasonable terms through normal lending channels. The program operates through private-sector lenders who provide loans which are, in turn, guaranteed by the SBA – the agency has no funds for direct lending or grants.

A

A/P
Accounts Payable

A/R
Accounts Receivable

ACH
Automated Clearing House

Agency Guaranty
A commercial loan written with a guaranty of a private or municipal agency guarantying the loan payment to the lending institution, like the Small Business Administration (SBA)

Appraised Value
The value placed on an item, product or business by an appraiser recognized for expertise in a particular field

Asset
The entire property of a person, association, corporation or estate applicable or subject to the payment of debts

B

C

C Corporation
A separate legal entity once it is formed, so it must file its own taxes and be responsible for its dealings. It can have unlimited numbers of shareholders, and those shareholders can be any kind of legal entity. Additionally, since corporations are taxed on their income and shareholders have to claim dividends as taxable income themselves, shareholders of a "C" corporation are double taxed on their dividend income.

CFFO
Cash Flow from Operations

CPA
Certified Public Accountant

CRA
Community Reinvestment Act

Cash Flow
The movement of money into and out of your business

Cash Flow Statement
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

Certified Development Company
A non-profit corporation set up to contribute to the economic development of its community

Collateral
Something of value – securities, evidence of deposit or other property – pledged to support the repayment of an obligation

Commercial Mortgage
A mortgage loan written for a business purpose with a building used as collateral

Commercial Paper
Unsecured promissory notes of large corporations

Credit
Time allowed for the payment of goods or services sold on trust as well as confidence in the buyer's ability and intention to fulfill their financial obligations

Creditor
The lender of the funds, to whom someone owes a loan

D

DDA
Demand Deposit Account

E

ECOA
Equal Credit Opportunity Act

Equity
An accounting term used to describe the net investment of owners or stockholders in a business. Under the accounting equation, equity also represents the result of assets less liabilities.

F

G

GAAP
General Accepted Accounting Principles

General Partnerships
A form of business entity in which two or more co-owners engage in business-for-profit. For the most part, the partners own the business assets together and are personally liable for business debts.

H

I

IRA
Individual Retirement Account

IRS
Internal Revenue Service

ISO
Independent Servicing Organization

J

Joint Venture
Is a general partnership typically formed to undertake a particular business transaction or project rather than one intended to continue indefinitely. Most often, joint ventures are used in real estate matters where two or more persons undertake to develop a specific piece of real property.

K

L

Liabilities
Debt owed by the company, such as bank loans or accounts payable

Limited Liability Company (LLC)
A distinct type of business that offers an alternative to partnerships and corporations, by combining the corporate advantages of limited liability with the partnership advantage of pass-through taxation (earnings are taxed only once)

Limited Partnership
One or more "general" partners run the business while "limited" partners contribute capital and share in the profits. General partners remain personally liable for partnership debts and risks while limited partners incur no liability with respect to partnership obligations beyond their capital.

Line of Credit
A revolving credit where the funds can be re-used after repayment, usually for short durations

M

Marketable Securities
Stocks or bonds sold on an open market, like the New York Stock Exchange (NYSE), for which there is a readily available sale

Maturity
The date on which a loan becomes due

N

Net Worth
Property owned (assets), minus debts and obligations owed (liabilities), is the owner's equity (net worth)

Non-Profit
A corporation that cannot issue shares and cannot pay dividends. In addition, under the Federal Tax Code Section 501 (c)(3), a non-profit corporation is eligible for certain federal and state tax exemptions and, upon dissolution, must distribute its remaining assets to another non-profit group.

O

P

Q

R

S

S Corporation
Much like a "C" corporation in that it is also its own legal entity, protects its shareholders from legal liability, and requires a certain amount of yearly maintenance. However, an "S" corporation allows shareholders to claim their share of the corporation's income directly on their personal tax return, avoiding a double tax situation. However, an "S" corporation is generally limited in the amount of shareholders.

SCORE (Service Corps of Retired Executives)
10,500-member volunteer association sponsored by the Small Business Administration (SBA). SCORE matches volunteer business-management counselors with present prospective small business owners in need of expert advice.

Small Business Administration (SBA)
A governmental agency that aids, counsels, assists, and protects the interests of small business concerns, and advocates on their behalf within the government

Sole Proprietor
A sole proprietor is not a separate entity itself. A sole proprietor directly owns the business and is directly responsible for its debts.

T

Term Loan
A loan written for a specific term, e.g., 60 months, calling for a monthly principal and interest payments

Time Loan
A loan written for a set time period, usually with all principal and interest due at maturity

U

V

W

X

Y

Z

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