> Assets - Anything of value. Any interest in real or business property which can be appropriated for the payment of debt.

> Bad Debt - A debt that is not collectible and is therefore worthless to the creditor.

> Balance Sheet - Financial statement presenting the measure of assets, liabilities and owner's equity or net worth of business firm at a given point in time.

> Bridge Loan - Short-term loan to provide temporary financing until more permanent financing can be secured.

> Business Plan - A document that describes an organization's current status and its plans going forward. It generally projects future opportunities for the organization and maps the financial, operations, marketing and organizational strategies that will enable the organization to attain its goals.

> Capital - Broadly, all the money and assets of an enterprise used in transacting business.

> Capitalization - Long-term debt, preferred stock and common stock. Loan capital includes that which has been borrowed from and is repayable to third parties.

> Capital Markets - Those financial markets, including institutions and individuals, that exchange securities, especially long-term debt instruments.

> Cash Flow Financing - Short-term loan providing additional cash to cover cash shortfalls in anticipation of revenue, such as the payment(s) of receivables.

> Collateral - Assets pledged to secure the repayment of a loan.

> Covenant - An agreement or promise to do or not to do a particular action; to enter into a formal agreement; a promise incidental to a deed or contract: full disclosure of information, preservation of net worth, maintenance of asset quality, maintenance of adequate cash flow, control of growth, control of management, assurance of legal existence and concept of going concern.

> Current Asset - Asset that will normally be turned into cash within one (1) year.

> Current Liability - Liability that will normally be repaid within one (1) year.

> Current Ratio - Current assets divided by current liabilities--a metric of liquidity. The higher the ratio (assuming current assets are liquid) the greater the cushion between current obligations and a business's ability to meet them.

> Debt - An amount owed for fund borrowed. Most debt is secured by a note, bond, mortgage or other instrument that states repayment and interest provisions.

> Debt Service - Amount of payment due regularly to meet a debt agreement; usually a monthly, quarterly or annual obligation.

> Debt Service Reserve - Term used to refer to cash reserves set aside by a borrower, either by internal policy or lender covenant, to repay debt in the event that cash generated by operations is insufficient.

> Default - A failure to discharge a duty. The occurrence of an event that cuts short the rights or remedies of one of the parties to a loan agreement.

> Delinquent - A payment that is overdue and unpaid.

> Due Diligence - The task of carefully confirming all critical assumptions and facts presented by a borrower--i.e., verifying sources of income, accuracy of financial statements, value of assets and other material facts presented by the borrower.

> Equity - The value of property in a business greater than the total debt held on it. Equity investments typically take the form of an owner's share in the business and a share in the return or profits.

> General Recourse - Rights to demand payment from the general assets of the debtor without seniority in access to any specific assets.

> Guaranteed Loan - A pledge to cover the payment of debt or to perform some obligation if the person liable fails to perform according to the loan contract. A third party guarantor or co-signer.

> Income Statement - Financial Statement that conveys the revenue, costs, expenses and profits of a business over a period of time--monthly, quarterly, annually.

> Interest - The cost of borrowed funds.

> Interim Financing - Short-term loan to provide temporary financing until more permanent financing is secured (see bridge loan).

> Intermediary - Organizations that serve as wholesalers who process large amounts of loans or investments.

> Leverage - Using long-term debt to secure funds for an organization. The phrase, " a leveraged balance sheet," refers to significant long-term debt on the balance sheet vis-a-vis equity and total assets.

> Total Liabilities - Total value of financial claims on a firm's assets. Equals total assets minus owner's equity.

> Limited Liability - Limitation of shareholder's losses to the amount invested.

> Limited Recourse - Rights only to specifically stipulated to satisfy an unpaid debt.

> Line of Credit - Agreement by a bank that a company may borrow at any time up to an established limit; also known as a "revolving account."

> Linked Deposit - A deposit in an account with a financial institution to induce its support for one or more investment projects. By accruing no interest or low interest on its deposit, a financial institution essentially subsidizes the interest rate of the project borrowers.

> Loan Agreement - A written contract between a lender and a borrower that sets out the rights and obligations of each party regarding a specified loan.

> Loss Loan Reserves - The portion of earnings or permanent capital designated by the board of directors as a reserve against possible loan losses and, as such, unavailable for lending purposes. GAAP (generally accepted accounting principles) governing for-profit and regulated financial institutions require that loan loss expense be deducted as an annual expense on an accrual basis and that the loan loss reserve be shown as a contra-asset account reducing the lending portfolio (current asset on the balance sheet).

> Market Rate - The rate of interest a company must pay to borrow funds.

> Net Working Capital - Current assets minus current liabilities.

> Net Worth - Total assets minus total liabilities. Aggregate net value of a business.

> Opportunity Cost - The potential benefit that is foregone from not following the most financially optimal alternative course of action.

> Portfolio - A combination of assets held for investment benefits, including financial and non-financial returns. The asset mix is usually varied in kind and size to maintain an acceptable level of risk and return.

> Principal - In commercial law, the principal is the amount that is received, in the case of a loan, or the amount from which flows the interest.

> Promissory Note - Promise to pay. Written contract between a borrower and a lender that is signed by the borrower and provides evidence of the borrower's indebtedness to the lender.

> Quick Ratio - Current Ratio minus inventory (see current ratio)--a more stringent metric of liquidity.

> Receivables - Accounts receivable that are owed to the business by its customers as a result of the ordinary extension of credit.

> Restructure - A revision of a financial agreement that alters the conditions or covenants of the original agreement. Parties may agree to restructure a loan agreement by: extending the loan term, lowering the monthly payment, lowering the interest rate, forgiving existing payment in arrears, reducing principal owed, etc. Restructures are typically done when a borrower is in serious delinquency and risk default on a loan.

> Roll Over - Prior to or at the time of the maturity of an investment or loan, the interested parties agree to continue to carry over the investment or loan for another successive period of time.

> Security - A pledge made to secure the performance of a contract or the fulfillment of an obligation. Examples are real estate, equipment stocks or a co-signer. Mortgages are a form of security with strong legal standing, because they are publicly-registered following a formal legal procedure. A mortgage gives the lending holding the mortgage security the right to reclaim the asset being financed, if repayment is not made.

> Senior Debt - Debt that must be repaid before subordinated debt receives payment in the event of a default or liquidation of a business.

> Subordinated Debt (Junior Debt) - Debt over which senior debt takes precedence. In the event of a bankruptcy, subordinated debt holders receive payment only after senior debt is fully paid. A subordination of security interest in property allows another creditor to have the rights to the proceeds of the sale of that property before the claim of the subordinated creditor.

> Term - Refers to the maturity or length of time until final repayment on a loan, bond, sale or other contractual obligation.

> Warranties - Statement attesting that certain statements are true. For instance, the borrower may warrant that it is a corporation, that it is entering into the agreement legally and that financial statements supplied to the bank are accurate.

> Working Capital - Current assets minus current liabilities (net working capital). All short-term funding needs for operations (excluding debt service and fixed assets). A company's investment in current assets that are used to maintain normal business operations. Net working capital, which is the excess of current assets over current liabilities is tantamount to working capital--a reflection of the resources in circulation to meet the operating needs and obligations as they come due.

> Write Off - When an investment such as a loan becomes seriously delinquent or in default and is deemed to be uncollectible. The lender may choose to charge the outstanding investment amount as an expense of a loss.