Module 6 Flashcards
(24 cards)
equity investors
purchase portion of business w hopes of future returns thru capital gains or dividend payments
long term debt
things like securing bond, where bondholder wants to receive specific rate of return in exchange for their investment
short term loans
generally seen when gods or supplies are sold and payment is expected within 30-90 days
finance charges
if you dont purchase an item with cash or debit you are assigned a finance charge
say money on finance charges if you can purchase with cash
interest rate
cost of borrowing in % terms
equity requirements
lenders generally mandate bc they show you are more likely to pay back loan
credit rating
score that represents risk associated with offering loan or line of credit
5 c’s of credit
determine whether or not to offer loan
character
application truthfulness about credit history
capacity
does business have ability to become profitable
collateral
anything of value that can be offered to repay loan in case of default
capital
equity applicant has placed into his/her own business
condition
applicants opportunity to sell lender on viability of business
small business administration (SBA)
created by us govt in 1953
aids counsels and protects nations small business community
works with lenders to provide loans and financing to small businesses
sba will lend money if person has:
excellent credit (no collection letters in past 3 years)
no bankruptcies in past 10 years
business plan
collateral
1/3 of required capital needed to start business
short term borrowing
repayment period expected to be 90 days or less
accounts payable
represents amounts owed to vendors and suppliers for services that have been pr
open market borrowing
free enterprise environment
bank financing
signing up for a loan from bank usually a bit simpler flexible loan terms prefer issuing shorter terms loans less negotiating power regarding interest rates
term loan
3-5 year loan
balloon payment
large payment due at back end of loan
not fully amortized at end of loan until balloon
lower payments leading up to balloon
kick starter
allows people to donate money toward cause or new business usually offering something in return if certain amount met
mezzanine financing
available to established companies that show growth potential but are not ready to go public
venture capitalist
investor who invests in private company and provides funds to firm in exchange for owning portion of company
