Access to Capital Glossary



Accounting is the recording of financial transactions. Accounting for your business includes storing, sorting, retrieving, summarizing, and presenting the information in various reports and analyses. Potential lenders may ask for a summary of your business accounting as part of your loan application. Learn more about what you might need to collect for a loan application.

Accounts Payable

Accounts payable (AP) is an accounting entry detailing your debts to creditors. Accounts payable are sometimes be referred to as "payables," and usually refer to goods or services received. Your list of payables is an important part of your balance sheet.

Accounts Receivable

Accounts receivable (AR) refers to money that customers and other institutions owe your business. Usually receivables are organized by notes, statements, invoices or other written evidence. You should include your receivables on your balance sheet to maintain a record of how money is flowing in and out of your business.


An affiliate is a type of relationship between businesses in which one of the businesses owns some minority part of the other.


Debt amortization is the gradual reduction of debt, over a specific period of time, via a fixed repayment schedule. The payment should be sufficient to pay current interest and to eliminate the debt amount at maturity. Debt amortization plans can be a useful tool to help manage your loans and project your payment schedule.

Annual Percentage Rate (APR)

The annual percentage rate (or APR) is the amount of interest on your total loan amount. You pay the full APR annually (averaged out over the term of the loan). A lower APR translates to lower monthly payments. When calculating your monthly payments on a loan, be sure to include the interest amount.


Assets in a small business include anything that can be used to pay debts. "Liquid" or "tangible" assets can be quickly sold and converted to cash, or used as collateral in a loan application. Examples of tangible assets include buildings, vehicles, or office equipment. On a balance sheet, your assets should include anything owned or due to the business including cash, Accounts Receivable, inventory, and other items.


Financial assumptions and projections are a part of the business plan. Lenders and investors will review the research and calculations you make about projected profitability and your customer base. Be prepared to show how you made these calculations and assumptions.


Bad Debts

Money your business is owed by another person or company that is considered "uncollectable," creating a bad debt. A debt becomes uncollectable when there is no longer any chance the amount owed will be paid. You must show tax agents and lenders that you have taken reasonable steps to collect the money, but were unable to do so. An example of a bad debt is if you loan money to a supplier or distributor for a business purpose, and they are unable to pay you back.

Balance Sheet

Your balance sheet is a financial document where you list your company's assets, liabilities, and net worth. The balance sheet will serve as a snapshot of your business' financial health. Analysis of a balance sheet over time can provide you with important information about your business including management of inventory, revenue collection, and debt repayment.


In order to claim bankruptcy for your business, you must file with a federal district court and demonstrate that you cannot meet your debt obligations and require either reorganization of your business debts or liquidation of the business assets.

Blanket Lien

You can secure a loan for your small business by accepting a blanket lien from a lender. A blanket lien gives lenders the right to seize almost all your business assets if you default on your small business loan. In the event of default, lenders can only take what is needed to settle your outstanding debt.

Break-Even Point

The break-even point is the time at which your business revenue will equal total expenses -- the point at which there is neither a profit nor loss. A breakeven analysis is used to determine when your business will be able to cover all your expenses. To calculate your break-even point, forecast your expected fixed costs (usually include overhead expenses like rent or payroll) and variable costs (expenses that can shift like inventory or shipping), and compare to your expected total revenue over time.

Business Certificate/License

Generally, every business needs some form of license or permit to operate legally. It's important to note that licensing and permit requirements vary depending on the type of business you have, where the business is located, and what government rules apply.

Business Lease

A business lease is a document that outlines the rental agreement between your business and the property you are renting (unless you own your property). Before signing a business lease, you should carefully review it, and if you can, have it reviewed by an attorney or legal expert. Residential and business leases are very different, and generally, businesses are not protected by leases the way residents are. Your rental agreement and associated costs may be part of the package you submit with your loan application. Learn more about what you might need to collect for a loan application.

Business Plan

Your business plan is the comprehensive document that outlines everything about your business. The business plan is a living document, meaning that it should be reviewed and updated as your business output and needs change. Usually, the business plan projects your plans, projected debts and revenues, and growth for 3-5 years. The business plan will be required for most loan applications. Learn more about what you might need to collect for a loan application.


Capacity to Repay

When you apply for a loan, the lender will review your existing financial statements and your application to determine if you are eligible for the loan. By reviewing your sales, projections, and research, the lender decides if you will be able to pay back the loan within the loan term.

Cash Flow

Cash flow is the term that summarizes all of the cash that goes in and out of your business. Any lender will want to know what your cash flow is in order to determine your eligibility for a loan, or your capacity to repay.

Closed Loan

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.

CLP - Certified Lender Program (SBA)

The most active and expert lenders qualify for the SBA's streamlined lending programs. Under these programs, lenders are delegated partial or full authority to approve loans, which results in faster service from SBA. Certified lenders are those who have been heavily involved in regular SBA loan-guaranty processing and have met certain other criteria. They receive a partial delegation of authority and are given a three-day turnaround by the SBA on their applications (they may also use regular SBA loan processing). Certified lenders account for nearly a third of all SBA business loan guaranties. Learn more about the SBA and SBA loans.

COC - Certificate of Competency (SBA)

The Certificate of Competency (COC) program allows a small business to appeal a contracting officer's determination that it is unable to fulfill the requirements of a specific government contract on which it is the apparent low bidder. When the small business applies for a COC, SBA industrial and financial specialists conduct a detailed review of the firm's capabilities to perform on the contract. If the business demonstrates the ability to perform, the SBA issues a COC to the contracting officer requiring the award of that specific contract to the small business. Learn more about the SBA and SBA loans.


Collateral is used to provide an additional source of loan repayment in the instance of loan default. Assets such as inventory, equipment, and buildings can be promised to the lender in order to support the repayment of a loan.

Credit Score (Personal and Business)

Your personal credit score helps lenders calculate the risk associated with lending to you or your business. The credit score is determined by your debt and payment history on things like credit cards, mortgages, or other bills. Also known as a FICO score, credit scores can range from 300 (worst) to 850 (best). Things that can impact your credit score include bad personal payment history, little to no credit history, and high credit utilization (meaning you are using a high proportion of your available credit). Some lenders use a business credit score, or FICO Small Business Scoring Service (FICO SBSS), to make accurate lending decisions. The Small Business Association now uses the FICO SBSS to pre-screen for its popular 7(a) loan. The score is calculated by looking at personal and business credit history, as well as other business financial information like age of the business, number of employees, and financial data. Learn more about credit scores in the Venturize Credit Score IQ section.



If you do not pay the principal and/or interest on your loan by the due date in the loan terms, you will default. In the event of a loan default, the lender has the legal recourse to seize any collateral promised in the loan agreement. In the case of a blanket lien, the lender can go after your business assets if your loan becomes delinquent.


Financial Forecast

The financial forecast is an account document, usually included in your business plan, that projects the revenues and expenses you expect over the next 1-5 years.

Five Cs

The 5 Cs of credit are a handy way to remember what lenders are looking for when they are making decisions about loans. They are: Credit History (your full credit report and payment and debt history); Capacity to Repay (your ability to make monthly payments and pay down the overall loan); Collateral (the assets you have to promise against your loan); Capital (the amount of assets you have on hand, minus any liabilities); and Conditions (your plans for using the money are evaluated as part of the lending process. The lender may also look at economic and environmental conditions within your geographic area or within your industry). Learn more about what impacts your credit with Venturize's Credit Score IQ resources.

Fixed Assets

Fixed assets include any items that are purchased for your business and used for long-term business purposes. This can include equipment, buildings, machinery, or tools.

Fixed Costs

Fixed costs in your business are the regular payments you make that generally cost the same for each payment, regardless of your sales. These fixed costs are sometimes referred to as "overhead." Examples of fixed costs include rent, utilities, and taxes.


Guaranteed Loan (SBA)

The Small Business Administration (SBA) does not make loans itself. Instead, it guarantees loans offered to small businesses by banks and other lending institutions. Learn more about the SBA and SBA loans.


If someone agrees to be a guarantor of your loan, that person will be responsible for all (unlimited guaranty) or part (limited guaranty) of your loan payments if you default.


Income Statement

An income statement (also known as a 'profit and loss' statement) tallies the total revenue, expenses, gains, and losses. This statement shows you where money is moving in and out of your business. Over time, your income statements can be taken together to help you forecast future earnings and spending.


Insolvency is the inability of a borrower to meet financial obligations with the lender(s) as payments become due. Insolvency may result in legal actions and assets may be liquidated to pay debts. The lender's rights in insolvency proceedings are included in the documentation of the original loan.

Installment Loan

In an installment loan, the interest amount is included in the principal loan amount, and the borrower repays the debt periodically.

Interest Rate

An interest rate is the percentage of money paid by the borrower to use the money provided by a the lender. Normally, loan interest is expressed in APR, which is the interest rate compounded monthly.


Merchandise that is purchased and/or produced and stored for eventual sale

Inventory Financing

You can borrow money based on your existing inventory. As you sell the inventory, you use your revenue to pay the loan. Some inventory financing companies will provide you with cash up front to purchase inventory.



Your liabilities include any debts you owe, including loan debt.

Loan Payoff Amount

The total amount of money, including interest, that you need to pay your lender by the end of your payment period is the loan payoff amount.


Negative Net Worth

If the total debt you owe exceeds your business profits, your business is considered to have negative net worth.

Net Worth

Your business' net worth, or equity, is equal to all assets minus all liabilities (including debts and obligations).



Your business has obligations to lenders and other companies or individuals in the form of orders placed, services received, or other transactions. Any money, merchandise, or service owed to someone else is an obligation.


Prepayment Penalty

Some lenders charge a fee if you pay more than is agreed upon in your loan repayment terms. This is typically done to protect the lender and ensure that they receive the full loan payment and interest over time.

Prime Rate

Customers with high credit ratings may be qualified to receive the best, or prime, interest rate on loans from banks and other lenders.


Proprietorship is the most common legal form of business ownership. In a proprietorship, the business owner is responsible for all liabilities and obligations.


Revolving Credit

Revolving credit is a type of account that allows the borrower to draw funds as needed. Credit cards are considered a form of revolving credit.


Secured Loans

Secured credit refers to loans your business can qualify for by promising collateral, like equipment or real estate. If you default on a secured loan, the collateral and other property can be seized by the lender to satisfy any part of the loan that has not been paid. Loans can also be secured by the lenders putting a blanket lien on your business.

Short Term

A short term loan typically has a repayment stipulation of one year or less.

Size Standards

The term "size standard" describes the definition of a small business. A business is considered "small" if it meets or is below an established "size standard." Check loan terms to make sure that your business qualifies as a small business.


A business is considered solvent if it has the appropriate financial abilities to meet any obligations or liabilities and continue to break even or make profit.



Turnover is the number of times that an average inventory of goods is sold during a fiscal year, or some other designated time period. You may need to calculate turnover as part of your preparation for loan applications. Learn more about what you might need to collect for a loan application.


Unsecured Loans

Unsecured loans typically don't require collateral. Because these loans are not "secured" by collateral, they are usually more expensive and are usually only available to borrowers with high credit scores.


Variable Costs

Variable costs in your business are directly related to the sale of goods and services. Unlike fixed costs (like overhead), variable costs change over time. Examples of variable costs include shipping, raw materials, and labor. As sales increase, variable costs increase.


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