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Glossary A - Z

All A B C E F G I L M O P R S T

Asset finance

Leasing or renting assets such as machinery or office equipment can save you the initial costs of buying them outright. In addition, asset finance may have other benefits for your business (cash flow, tax, etc.). Advantages Advantages of leasing or hire purchases include: access to a high standard of equipment that you might not be able

Balance sheet

“Bilancia” means scales in Italian. When both scales are of equal weight, they are said to be balanced. In a balance sheet, assets (ASSETS // use of funds) and capital (LIABILITIES // claims of creditors and companies to the assets) are compared and must always represent the same amount (= balance equation). There is a

Budget figures

As the name implies, budget figures are assumptions in your business plan for future business activities. It is best to start with the profit/loss account and balance planning. Based on that, you can then create a liquidity plan which gives you your capital requirements. It is particularly important to determine budget figures over a period

Business loan

A business loan is credit, usually in the form of cash, that you borrow and repay over an agreed length of time. Banks and alternative funding sources, such as community development finance institutions, crowdfunding platforms and even friends and family can provide businesses with loans. In addition to repaying the amount you are borrowing, you will need to pay interest

Crowdfunding

Crowdfunding (also known as crowd financing or crowd-sourced capital) involves a number of people each investing, lending or contributing smaller amounts of money to your business or idea. This money will then be pooled to reach your funding target. Your idea will usually be showcased through a crowdfunding website. Advantages Advantages of crowdfunding include: it

Equity finance

Equity finance involves selling part of your business (‘shares’) to an investor. The investor in turn will take a share of any profits or losses that the company makes. Advantages Advantages of equity finance include: investors can bring new skills and opportunities to the business, e.g. marketing or how to export overseas you won’t have

Equity stake

An equity stake is a stake in a company in the form of company shares. The person who has a stake in a company is the “stake holder”, “shareholder” or “stock holder”, depending on the type of company. This person has a right to vote (a voice) and a right to profit-sharing. Legal consequences are

Financial analysis

The “financial analysis” is used for determining actual, current economic indicators. Based on accounting data, it shows the revenue and cost situation of the company as well as the amortization. As such, it provides information about the current income situation, which is why banks like using them as a credit decision basis. The global lexicon

Funding

Funding can be any form of project financing. In any case it is just a share of the total eligible costs of the project. There is funding for investment and innovation projects. The conditions for being eligible for funding for an investment project usually differs from those for innovation projects. Funding is always there to

Goods financing

Goods financing always occurs when the purchase of goods needs to be financed, i.e. not paid in cash. This is always somehow associated with credit. Entrepreneurs especially (start-up companies – see also “Start-up financing”) need this to finance their initial stock. With the financing of goods, the start-up can optimise its purchasing of goods (see

Investment financing

With an investment loan, you have every option of financing assets that are used in the long-term for business and are, in turn, recorded as fixed assets on your balance sheet. Investment loans, public funding or leasing? The solution that will bring you the most benefits depends on a number of factors.

Invoice factoring

Invoice financing means that a third party agrees to buy your unpaid invoices for a fee. Invoice financiers can be independent, or can be part of a bank or financial institution. Largely speaking, there are two types of invoice financing that are used in the UK. Factoring ‘Factoring’ – also known as ‘debt factoring’ – usually involves

Leasing

Leasing is a sub-category of asset finance. Leasing or renting assets such as machinery or office equipment can save you the initial costs of buying them outright. In addition, asset finance may have other benefits for your business (cash flow, tax, etc.). Advantages Advantages of leasing or hire purchases include: access to a high standard of equipment that

Mezzanine

In old Vienna households, the term mezzanine was used for a floor in between the ground floor and the first floor. So it is “something in-between”. In the financial world, the term refers to a tool that strengthens your equity base, which is lent in all its forms as a loan. Mezzanine capital is accepted

Micro lending

Micro lending in its broadest sense is a kind of financial basic service, which can include not only credits, but also savings accounts or insurance policies. The term is associated mostly with the “world’s poorest”, but is also used for small loans (from one Euro up to several thousand) for start-up businesses or small-scale entrepreneurs.

Overdraft

An overdraft is a credit facility you typically agree with the provider of your business current account. It allows you to cover short-term financing needs. Traditionally, persistent use of an overdraft facility was regarded as a sign that a business may be in financial difficulty. However, with new forms of lending emerging, it is becoming an

Private equity

Private equity is given in the form of “equity finance”. Investors can be private or institutional investors. If the capital is given to young or high-risk companies with an uncertain future earnings situation, this is also called risk or venture capital. Advantages Advantages include: investors can bring new skills and opportunities to the business, e.g.

Property finance

Property finance extends into a number of areas and is geared towards supporting experienced property professionals in the areas of: Residential property finance Commercial property finance Student accommodation finance Mixed-use property finance This type of finance is typically offered in the form of a commercial mortgage and can be used for several purposes including: buying business

Resource financing

In daily business, you often have to pay for material purchases or services in advance. This can lead to short-term financing requirements. The time between invoicing and payment also needs to be bridged. Resource financing allows you to easily finance the ongoing business. With this type of financing you can cover your current resources such

Revenue/profit calculation

The revenue/profit calculation or EÜR determines your profit as operating revenue surplus over operating expenditure. It is therefore based on deposits and withdrawals. As such, there are no receivables, liabilities or reserves. It is a less common type of profit determination; usually, profit is read from the profit/loss sheet. Small businesses and freelancers can make

Reverse Factoring

With “Reverse Factoring”, a factor assumes the funding and pays 100% of this straight away. The loan now has to be paid back directly to the factor no later than the payment deadline. See also Goods financing

Sale & Lease Back

A company sells its own assets from its fixed assets (a hall, for example) to a leasing company and then leases them back. (Any profits from the difference between book value and market price are taxable!) This creates liquidity in the short term, but then the liquidity is reduced with the leasing rates.

Start-up financing

Start-ups or start-up companies are newly founded companies. (“Good, innovative idea and limited financial resources”.) They need capital to build their business. The capital can be given by investors (family and friends, business angels, venture capital companies, etc.) in the form of equity against business interests but also in the form of debt (loans). Whether

Surety

A surety is a guarantee (e.g. for cheques or currency obligations). With a surety loan, a bank does not issue money but a directly enforceable guarantee or liability.

Trade finance

Trade finance is an important external source of working capital financing. It is a form of short-term credit typically used by companies that export or import goods. There are a number of banks and specialist finance providers that offer trade finance. The advantages of trade finance are: it is a relatively easy way to arrange short-term finance it helps business