Term

Definition

7(a) Loan Program

SBA’s primary business loan program to help promising small businesses unable to obtain financing on reasonable terms. Loans are provided through participating lenders with SBA guaranteeing repayment of the loan. Includes Lenders Programs (Certified and Preferred), Express Programs (SBAExpress, CommunityExpress, and PatriotExpress), Export Loan Programs (ExportExpress, Export Working Capital, International Trade Loans), Rural Lender Advantage, and Special Purpose Loans (CAIP, CAPLines, Employee Trusts, and Pollution Control).

Accounts Payable

Obligations due to trade suppliers who have provided inventory or goods and services used in operating the business. Suppliers generally offer terms to compete with other suppliers.

Accounts Receivable (A/R)

Dollars due from customers. They arise from the process of selling inventory or services on terms that allow delivery to the customer prior to the collection of cash.

Angel Investors

High net worth individual investors who seek high returns through private investments in start-up companies.

Assets

Anything of value that is owned or due to the business. Assets are shown on the Balance Sheet at net book or net realizable value; appreciated values are not generally considered.

Balance Sheet

A snapshot of the company's financial standing at an instant in time. The balance sheet shows the company's financial position, what it owns (assets) and what it owes (liabilities and net worth).

5 C's of Credit:

A lender will generally consider in its loan decision the following: character (integrity); capacity (sufficient cash flow to service the obligation); capital (net worth), collateral (assets to secure the debt), and conditions (of the borrower and the overall economy.

CAIP Program

Assists U.S. companies doing business in areas of the country that have been negatively affected by NAFTA. The CAIP works with the SBA in both the Basic7(a) Loan Program and CDC/504 Loan Program to reduce borrower costs and increase the availability of these proven business assistance programs.

Capacity to Repay (Ability)

A prospective lender wants to know how a loan is to be repaid and will consider the cash flow from the business, the timing of the repayment, the probability of repayment, the payment history on existing credit relationships, possible collateral, etc.

Capital

The money you personally have invested in the business and an indication of how much you will lose should the business fail. Prospective lenders and investors will expect you to contribute your own assets and to undertake personal financial risk to establish the business before asking them to commit any funding. If you have a significant personal investment you are more likely to do everything in your power to make the business successful.

CAPLines

The umbrella program under which the SBA helps small businesses meet their short-term and cyclical working-capital needs. A CAPLines loan, except the Small Asset-Based Line, can be for any dollar amount that does not exceed SBA's limit.

CDC/504 Loan Program

Provides long-term, fixed-rate financing to small businesses to acquire major fixed assets, such as equipment, land and buildings, for expansion or modernization. Loans are available through SBA approved Certified Development Companies (CDC).

Certified Development Company (CDC)

A nonprofit corporation set up to contribute to the economic development of its community. CDCs work with the SBA and private sector lenders to provide financing to small businesses.

Character

The personal impression you make on a potential lender or investor; it generally revolves around your potential to repay the loan or generate a return on funds invested in your company. Your personal history, educational background and experience in business and in your industry will be considered, as will your references and the background and experience of your employees.

Collateral

Collateral or guarantees are additional forms of security you can provide the lender. If the business cannot repay its loan, the bank wants to know there is a second source of repayment. Assets such as equipment, buildings, accounts receivable, and in some cases, inventory, are considered possible sources of repayment if they are sold by the bank for cash. Both business and personal assets can be sources of collateral for a loan. A guarantee is just that—someone else signs a guarantee document promising to repay the loan if you can't. Some lenders may require such a guarantee in addition to collateral as security for a loan.

Conditions

Conditions focus on the intended purpose of the loan. Will the money be used for working capital, additional equipment, or inventory? The lender will also consider the local economic climate and conditions both within your industry and in other industries that could affect your business.

Credit History

An individual’s or business’s history in paying financial obligations on time.

Current Assets

Assets that mature in less than one year.

Current Liabilities

Obligations that must be paid within 12 months.

Debt Financing

Essentially loans; sources include banks, savings and loans, commercial finance companies, and SBA guaranteed loans.

Disaster Assistance Loans

Business owners, homeowners, renters and/or personal-property owners in a declared disaster area may be eligible for financial assistance from SBA.

Employee Trusts

Provides financial assistance to Employee Stock Ownership Plans. The employee trust must be part of a plan sponsored by the employer company and qualified under regulations set by either the IRS Code or the Department of Labor.

Equity

Equity can be built up in a business through retained earnings or the injection of cash from either the owner or investors.

Equity Capital/Equity Financing

Funds or investment/seed money raised by a business in exchange for a share of ownership in the business. Ownership is represented by owning shares of stock outright or having the right to convert other financial instruments into stock of that business.

Equity Investment

Owners invest either assets that are applicable to the operation of the business and/or cash that can be used to acquire such assets.

Equity/Net Worth

Equity is represented by the total assets of the business minus its total liabilities; it constitutes the owner’s share in the business.

ExportExpress Program

Provides exporters and lenders a streamlined method to obtain SBA backed financing for loans and lines of credit up to $250,000 that support exporting. 

Export Working Capital Program (EWCP)

Loans targeted to businesses that are able to generate export sales and need additional working capital to support these sales. 

Financial Programs

Encompasses a broad range of SBA small business financing options, including programs for small business investment, guaranteed business loans, and bonding.

Fixed Assets

Plant, furniture, equipment, etc. used but not consumed in the manufacture or sale of a product/service.

Income Statement

Shows all income and expense accounts over a period of time; also known as profit and loss statement.

Intangibles

A nonphysical resource that provides support or an advantage in the marketing of a product or service, such as patents, copyrights, goodwill, etc.

International Trade Loan Program

A term loan designed for businesses that plan to start/continue exporting or those that that have been adversely affected by competition from imports.

Inventory

The goods and materials a company purchases to resell at a profit. In the process, sales and receivables are generated. The company purchases raw material inventory that is processed to be sold as finished goods inventory.

Liabilities

Liabilities are financial obligations of a business, in the form of loans, notes payable, accounts payable, etc

Micro-loan Loan Program

Provides short-term loans of up to $35,000 to small businesses and not-for-profit child-care centers for working capital or the purchase of inventory, supplies, furniture, fixtures, machinery and/or equipment. Loans are provided through approved SBA intermediaries (nonprofit community-based lenders).

Non-current Liabilities

Obligations that will not become due and payable in the coming year.

Notes Payable

Obligations in the form of promissory notes with short-term maturity dates of less than 12 months.

North American Industry Classification Codes (NAICS)

NAICS, which replaced the Standard Industrial Classification (SIC) system, is used to class similar types of businesses for analytical and other purposes.

Notes Receivable (N/R)

A receivable due the company in the form of a promissory note, arising because the company essentially made a loan to its customer.

Other Assets

Miscellaneous accounts such as deposits and long-term notes receivable from third parties. They are turned into cash when the asset is sold or when the note is repaid.

Other Current Assets

Prepaid expenses and other miscellaneous and current assets.

PatriotExpress 

Targeted to the military community, including veterans, Reservists and National Guard, certain active duty military and current spouse or widow of above.

Pollution Control Loans

7(a) loans that provide financing to eligible small businesses for the planning, design, or installation of a pollution control facility. This facility must prevent, reduce, abate, or control any form of pollution, and includes recycling.

Preferred Lender Program (PLP)

SBA delegates the credit decision and most servicing and liquidation authority and responsibility to certain SBA lenders that have a record of proficient SBA loan processing and servicing. In the event of payment default by the borrower and the need for enforced collections, the PLP lender agrees to liquidate all business assets before asking SBA to honor its guaranty.

Program for Investment in Micro-entrepreneurs (PRIME)

PRIME authorizes SBA to provide grant funds to qualified organizations through an RFP process to provide micro-enterprise technical assistance.

Resource Management

The ability of individuals to manage the resources of their business, sometimes referred to as "character." This is a prime consideration when determining whether or not a loan will be made.

SBAExpress

A highly streamlined SBA loan product that provides expedited SBA financing up to a maximum of $350,000.

SBA Lenders, Lending Partners, Intermediaries 

Banks, Credit Unions, Small Business Lending Companies (SBLCs), Certified Development Companies (CDCs,) and Micro-lending Intermediaries.

SBA Loan Guaranty

With a loan guaranty, funds are provided by independent lenders who receive the guaranty of the Federal Government on a portion of the loan they make to a small business. These guaranties allow a lender to extend capital to borrowers who may not otherwise receive a loan because they are outside traditional credit standards.

Surety Bond

A three-party agreement between a surety, a contractor and a project owner ensuring that the contractor complies with the terms and conditions of a contract. If the contractor is unable to perform the contract, the surety assumes the contractor's responsibilities and ensures that the project is completed. Surety bonds are traditionally necessary when a contractor is doing business with the government.

Surety Bond Guarantee (SBG) Program

Provides small and minority contractors with surety bonds to support contracting opportunities for which they would not otherwise bid.

Surety Guarantee

An agreement between a surety bond company and the SBA that obligates SBA to assume a predetermined percentage of loss in the event the contractor does not meet the terms of the contract.

Small Business Investment Company (SBIC)

Licensed by the SBA, an SBIC provides venture capital to qualified small businesses.

Total Assets

Represent the sum of all the assets owned by or due to the business.

Total Liabilities

Represent the sum of all monetary obligations of a business and all claims creditors have on its assets.

Venture Capital (Equity Capital)

Investment/seed money raised by a business in exchange for a share of ownership in the business. Ownership is represented by owning shares of stock outright or having the right to convert other financial instruments into stock of that business.

Working Capital

The excess of current assets over current liabilities. Working capital is typically used for necessary business expenses including inventory, payroll, uniforms, etc.