GLOSSARY

Short-term obligations owed by a company to their creditors or suppliers that have not yet been paid. They appear on a balance sheet as a current liability.

Money that is owed to a business in exchange for goods or services. The goods or services have been delivered, but not yet paid for. AR is listed on a balance sheet as an asset.

Funding provided to a business through a source other than a traditional bank loan.

May also be referred to as Non-Traditional Financing.

Loan or line of credit to a business that is secured, meaning protected by, collateral from the business. This collateral includes accounts receivable, inventory, equipment and machinery, and real property.

Also referred to as asset-based financing.

A one-time, larger than usual payment, typically made at the end of a loan’s term.

The amount of money a lender would be willing to provide a business, based on the value of the collateral from the business.

It may also be referred to a collateral base.

Something that a business is willing to pledge in return for a loan. Failure to pay a loan would typically result in the collateral being forfeited to the lender. Examples of collateral pledged for business loans are AR, inventory, machinery and equipment, and real property. In some cases, intangible property such as intellectual property or the business’s goodwill can be pledged as collateral.

There are owner-occupied and non-owner occupied CRE. In the context of commercial and industrial loans, lenders lend on owner-occupied commercial property that is used for the purpose of operating a business. This can constitute an office environment, a warehouse, factory, or storage space.

A formal agreement that is put in place between a lender and borrower. The contract typically favors the lender and limits the borrower’s actions.

The difference in value between the asset and the debt associated with it.

The amount of money that a company would receive if they were to sell the assets in an auction scenario, immediately. FLV allows the company and its investors and lenders to understand the likely recovery value in the worst case scenario if the asset or all the company’s assets were to be sold at auction.

A pre-determined borrowing limit that can be drawn from repeatedly and repaid when the borrower has cash available for payment of principal. The loan agreement typically sets an interest rate on the average principal outstanding over a set time period (typically monthly).

A term to describe readily available sources of cash, which includes cash on deposit and other assets that can quickly be sold/redeemed and converted to cash.

An assessment of risk that is considered before approving an applicant for a loan. This ratio compares the amount of money being borrowed (loan) to the market price (value) of the collateral.

An estimated value of an asset that would be obtained in a quick sale over a relatively short period of time after the costs associated with the sale were accounted for (for example commissions and legal fees).

The chances that an outcome or the gains from an investment will differ from the expected outcome or gains. Higher risk means higher chance of the outcome differing from the expectation.