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Business Center Business Glossary
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The Roselle UEZ Business Glossary is a resource that enables you to define business terms you may find in business documents and contracts. Browse through or click alpha links to jump to any term:
8(a): The 8(a) Business Development program is designed to provide business development assistance and technical assistance to help socially and economically disadvantaged American businesses gain access to the mainstream American economy. The program is named for the section of the Small Business Act that authorizes its policies and procedures. Accounting: The recording, classifying, summarizing and interpreting in a significant manner and in terms of money, transactions and events of a financial character. Accounts Payable: Trade accounts of businesses representing obligations to pay for goods and services received Accounts Receivable: Trade accounts of businesses representing moneys due for goods sold or services rendered evidenced by notes, statements, invoices or other written evidence of a present obligation. Acid Ratio: Current assets less inventories divided by current liabilities. Also known as "Quick Ratio." Acquisition: The acquiring of supplies or services by the federal government with appropriated funds through purchase or lease. ADA (Americans With Disabilities Act): The Americans with Disabilities Act (ADA) gives federal civil rights protections to individuals with disabilities similar to those provided to individuals on the basis of race, color, sex, national origin, age, and religion. It guarantees equal opportunity for individuals with disabilities in public accommodations, employment, transportation, State and local government services, and telecommunications. Affiliates: Business concerns, organizations, or individuals that control each other or that are controlled by a third party. Control may include shared management or ownership; common use of facilities, equipment, and employees; or family interest. The calculation of a firm's size includes the employees or receipts of all affiliates. Amortization: Gradual reduction of term debt by periodic payment sufficient to pay current interest and to eliminate the principal at maturity. Ancillary Bond: A type of surety bond where the surety company guarantees other factors which are incidental and essential to the performance of a contract. Annual Receipts: Receipts are averaged over a firm's latest 3 completed fiscal years to determine its average annual receipts. "Receipts" means the firm's gross or total income, plus cost of goods sold, as defined by or reported on the firm's Federal Income Tax return. The term does not include, however, net capital gains or losses, nor taxes collected for and remitted to a taxing authority if included in gross or total income. Appraised Value: The value placed on an item, product or business by an appraiser, recognized for experience in a particular field. Assets: The entire property of a person, association, corporation, or estate applicable or subject to the payment of debts. Assumptions: The act of assuming/undertaking another's debts or obligations. Auction: A public sale of goods to the highest bidder. Automatic Data Processing (ADP): 1. Data processing largely performed by automatic means. 2. Pertaining to data processing equipment such as electrical accounting machines and electronic data processing equipment. 3. The discipline which deals with methods and techniques of automatic data processing. Bad Debts: Funds owing to a business which are determined to be uncollectible. Balance Sheet: Financial statement listing a company's assets, liabilities, and equity on a specific date. Bankruptcy: A condition in which a business cannot meet its debt obligations and petitions a federal district court for either reorganization of its debts or liquidation of its assets. In the action the property of a debtor is taken over by a receiver or trustee in bankruptcy for the benefit of the creditors. This action is conducted as prescribed by the National Bankruptcy Act, and may be voluntary or involuntary. Best And Final Offer: For negotiated procurements, a contractor's final offer following the conclusion of discussions. Bid Bond: A type of surety bond wherein the surety company guarantees the bidder will enter into a contract and furnish the required payment and performance bonds. Book Value: The value of an item or property at a specific time after deducting depreciation from original cost. Break-Even Point: The break-even point in any business is that point at which the volume of sales or revenues exactly equals total expenses -- the point at which there is neither a profit nor loss -- under varying levels of activity. The break-even point tells the manager what level of output or activity is required before the firm can make a profit; reflects the relationship between costs, volume and profits. Bundling Report: The purpose of this page is to provide a system to alert SBA's Office of Government Contracting of contract bundling practices on the part of federal agencies that preclude a small business from successfully competing for a contract. Business Concern: A business concern eligible for assistance as a small business is a business entity organized for profit, with a place of business located in the United States, and which operates primarily within the United States or makes a significant contribution to the US economy through payment of taxes or use of American products, materials, or labor. Business Death: Voluntary or involuntary closure of a firm or establishment. Business Dissolution: For enumeration purposes, the absence from any current record of a business that was present in a prior time period. Business Failure: The closure of a business causing a loss to at least one creditor. Business Plan: A comprehensive planning document which clearly describes the business developmental objective of an existing or proposed business applying for assistance in lending Programs. The plan outlines what and how and from where the resources needed to accomplish the objective will be obtained and utilized. Business Start: For enumeration purposes, a business with a name or similar designation that did not exist in a prior time period. Canceled Loan: The annulment or recission of an approved loan prior to disbursement. Capacity To Repay: The determination made by a lender on whether a borrower can repay a loan after examining financial statements, financial ratios and operating data. Capital: 1. Assets less liabilities, representing the ownership interest in a business; 2. A stock of accumulated goods, especially at a specified time and in contrast to income received during a specified time period; 3. Accumulated goods devoted to the production of goods; 4. Accumulated possessions calculated to bring income. Capital Expenditures: Business spending on additional plant equipment. Capitalization: The basic resources of a company including the owner's equity, retained earnings and fixed assets. One of the "Five C's" of Credit Capitalized Property: Personal property of the business which has an average dollar value of $300.00 or more and a life expectancy of one year or more. Capitalized property shall be depreciated annually over the expected useful life to the agency. Carrying Costs: Inventory costs associated with capital, storage, handling expenses, insurance, taxes and obsolescence. Cash Conversion Cycle: The length of time between the payment of payables and the collection of receivables. Cash Discount: An incentive offered by the seller to encourage the buyer to pay within a stipulated time. For example, if the terms are 2/10/N 30, the buyer may deduct 2 percent from the amount of the invoice (if paid within 10 days) otherwise, the full amount is due in 30 days. Cash Flow: The movement of money into and out of your business. Cash Flow Statement: An accounting presentation showing how much of the cash generated by the business remains after both expenses (including interest) and principal repayment on financing are paid. A projected cash flow statement indicates whether the business will have cash to pay its expenses, loans, and make a profit. Cash flows can be calculated for any given period of time, normally done on a monthly basis. Also, one of the Five "Cs" evaluated in determining a loan applicant's credit-worthiness CCR (Central Contract Registration): A data base of all businesses contracting or seeking contracts with the federal government. It is maintained by the U.S. Department of Defense. Certificate Of Deposit: Short-term instruments issued by commercial banks. Certified 8(a) Firm: A firm owned and operated by socially and economically disadvantaged individuals and eligible to receive federal contracts under the Small Business Administration’s 8(a) Business Development Program. Certified Development Company (CDC): A Certified Development Company is 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. There are about 270 CDCs nationwide. Each CDC covers a specific geographic area Certified Lender Program (CLP): 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. Character: The degree to which a potential borrower feels a moral obligation to repay debts as evidenced by the borower's credit and payment history. One of the "Five Cs" used in a lending officer's determination of a particular loan applicant's credit-worthiness. Charged Off Loan: An uncollectible loan for which the principal and accrued interest were removed from the receivable accounts. Charge-Off: An accounting transaction removing an uncollectible balance from the active receivable accounts. 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. Closing: Actions and procedures required to effect the documentation and disbursement of loan funds after the application has been approved, and the execution of all required documentation and its filing and recordation where required. Certificate of Competency: 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. Collateral: Something of value--securities, evidence of deposit or other property--pledged to support the repayment of an obligation. Also one of the Five "Cs" used in determining a loan applicant's credit worthiness. Collateral Document: A legal document covering the item(s) pledged as collateral on a loan, i.e., note, mortgages, assignment, etc. Collection Policy: Actions a business takes to collect slow-paying accounts. Commercial Paper: Unsecured promissory notes of large corporations. Compromise: The settlement of a claim resulting from a defaulted loan for less than the full amount due. Compromise settlement is a procedure available for use only in instances where the government cannot collect the full amount due within a reasonable time, by enforced collection proceedings or where the cost of such proceedings would not justify such effort. Conditions: External factors such as government regulation, competition, industry trends, national economic trends, that can affect the success of a business. One of the "Five Cs" of credit. Consortium: A coalition of organizations, such as banks and corporations, set up to fund ventures requiring large capital resources. Contingency Fund: Cash held for emergencies or unexpected outflows of funds. Also known as "Precautionary Balances." Contingent Liability: A potential obligation that may be incurred dependent upon the occurrence of a future event. Two examples are: (1) the liability of an endorser or guarantor of a note if the primary borrower fails to pay as agreed and (2) the liability that would be incurred if a pending lawsuit is resolved in the other party's favor. Contract: A mutually binding legal relationship obligating the seller to furnish supplies or services (including construction) and the buyer to pay for them. Contracting: Purchasing, renting, leasing, or otherwise obtaining supplies or services from nonfederal sources. Contracting includes the description of supplies and services required, the selection and solicitation of sources, the preparation and award of contracts, and all phases of contract administration. It does not include grants or cooperative agreements. Contracting Officer: A person with the authority to enter into, administer, and/or terminate contracts and make related determinations and findings. Contractor Team Arrangement: An arrangement in which (a) two or more companies form a partnership or joint venture to act as potential prime contractor; or (b) an agreement by a potential prime contractor with one or more other companies to have them act as its subcontractors under a specified government contract or acquisition program. Copyright: The legal right granted to authors, composers, artists and publishers to protect their thoughts and ideas for exclusive publication, reproduction, sale and distribution of their works. Some of the material on SBA's web site is copyrighted and it will be so stated in the document. If it is not copyrighted we prefer that you link to our information rather than taking it and posting it on your site. Our information changes hourly and daily. Corporation: A group of persons granted a state charter legally recognizing them as a separate entity having its own rights, privileges, and liabilities distinct from those of its members. The process of incorporating should be completed with the state's secretary of state or state corporate counsel and usually requires the services of an attorney. Costs: Money obligated for goods and services received during a given period of time, regardless of when ordered or whether paid for. Covenant: A prescription for action in a loan document. Covenant not to Compete: The agreement by the seller of a business, not to enter into competition with the buyer of the business within a specific area for a specific period of time. Credit: Time allowed for the payment of goods or services sold on trust as well as confidence in the buyer's ability and intention to fulfill their financial obligations. Credit Period: Length of time allowed before the credit buyer must pay for credit purchases. Credit Policy: Actions taken by a business to grant, monitor and collect the cash for outstanding accounts receivable. Credit Rating: A grade assigned to a business concern to denote the net worth and credit standing to which the concern is entitled in the opinion of the rating agency as a result of its investigation. Current Assets: Money, inventory and equipment that will be used up in the short term -- usually within one year. Current Ratio: The ratio of current assets to liabilities. Also called "quick ratio." Data Element: The basic unit of identifiable and definable information. A data element occupies the space provided by fields in a record or blocks on a form. It has an identifying name and value or values for expressing a specific fact. Data Universal Numbering System (DUNS): D&B's Data Universal Numbering System, the D&B D-U-N-S Number, has become the standard for keeping track of the world's businesses. The D&B D-U-N-S Number is D&B's distinctive nine-digit identification sequence, which identifies information products and services originating exclusively through D&B. The D&B D-U-N-S Number is an internationally recognized common company identifier in EDI and global electronic commerce transactions. Debenture: Debt instrument evidencing the holder's right to receive interest and principal installments from the named obligor. Applies to all forms of unsecured, long-term debt evidenced by a certificate of debt. Debt Capital: Business financing that normally requires periodic interest payments and repayment of the principal within a specified time. Debt Financing: The provision of long term loans to small business concerns in exchange for debt securities or a note. Debt to Total Assets Ratio: Total debt divided by total assets. Deed of Trust: A document under seal which, when delivered, transfers a present interest in property. May be held as collateral. Defaults: The nonpayment of principal and/or interest on the due date as provided by the terms and conditions of the note. Deferred Loan: Loans whose principal and or interest installments are postponed for a specified period of time. Depreciation Schedule: An accounting procedure for determining the amount of value left in a piece of equipment. Disabled: The "disabled" are individuals whose physical or mental abilities prevent them from fully participating in normal activities and/or functions of living. Disaster: A disaster is a natural or human-caused occurrence causing vast destruction and distress. Disbursement: The actual payout to borrower of loan funds, in whole or part. It may be concurrent with the closing, or follow it. Disbursing Officer: An employee authorized to pay out cash or issue checks in settlement of vouchers approved by a certifying officer. Disclaimer: A statement regarding the responsibility and liability for website content and certain presenters, contractors, speakeres, etc. Choosing "More..." at the end of this definition will lead you to SBA's Disclaimer Of Endorsement and Liability regarding the material in the upcoming viewing screens. Discount Interest Rate: One in which the amount of interest is deducted from the face value of the loan with the borrower receiving the remainder. Divestiture: Change of ownership and/or control of a business from a majority (non-disadvantaged) to disadvantaged persons. Earning Power: The demonstrated ability of a business to earn a profit, over time, while following good accounting practices. When a business shows a reasonable profit on invested capital after fully maintaining the business property, appropriately compensating its owner and employees, servicing its obligations, and fully recognizing its costs, the business may be said to have demonstrated earning power. Demonstrated earning power is the foremost test of the business risk in pressing upon an application for a loan. Easement: A right or privilege that a person may have on another's land, as the right of a way or ingress or egress. EDI: Electronic Data Interchange: Transmission of information between computers using highly standardized electronic versions of common business documents. EEOC (Equal Employment Opportunity Commission): Small Business Information - The U.S. Equal Employment Opportunity Commission (EEOC) enforces the federal laws that prohibit employment discrimination on the basis of an individual's race, color, religion, sex, national origin, age, or disability. Electronic Data Interchange: Transmission of information between computers using highly standardized electronic versions of common business documents. Electronic Federal Tax Payment System (EFTPS): Electronic Federal Tax Payment System, provides an electronic system for paying federal taxes. The IRS replaced the current system of processing taxes in compliance with North American Free Trade Agreement (NAFTA) mandates, and now expedite the availability of funds and investment decision making information to the U.S. Treasury while providing flexible payment options to the business taxpayer Emerging Small Business: A small business concern whose size is no greater than 50 percent of the numerical size standard applicable to the Standard Industrial Classification code assigned to a contracting opportunity. Employees: The number of employees of a firm is its average number of persons employed for each pay period over the firm's latest 12 months. Any person on the payroll must be included as one employee regardless of hours worked or temporary status. The number of employees of a firm in business under 12 months is based on the average for each pay period it has been in business. Enterprise: Aggregation of all establishments owned by a parent company. An enterprise can consist of a single, independent establishment or it can include subsidiaries or other branch establishments under the same ownership and control. Entrepreneur: One who assumes the financial risk of the initiation, operation and management of a given business or undertaking. Equity: An accounting term used to describe the net investment of owners or stockholders in a business. Under the accounting equation, equity also represents the result of assets less liabilities. Equity Financing: The provision of funds for capital or operating expenses in exchange for capital stock, stock purchase warrants and options in the business financed, without any guaranteed return, but with the opportunity to share in the company's profits. Equity financing includes long-term subordinated securities containing stock options and/or warrants. Utilized in SBIC financing activities. Equity Partnership: A limited partnership arrangement for providing start-up and seed capital to businesses. Escrow Accounts: Funds placed in trust with a third party, by a borrower for a specific purpose and to be delivered to the borrower only upon the fulfillment of certain conditions. Establishment: A single-location business unit, which may be independent--called a single-establishment enterprise--or owned by a parent enterprise. Export Working Capital: The Export Working Capital (EWCP) Program was designed to provide short-term working capital to exporters. The EWCP is a combined effort of the SBA and the Export-Import Bank. Fair And Reasonable Price: A price that is fair to both parties, considering the agreed-upon conditions, promised quality, and timeliness of contract performance. "Fair and reasonable" price is subject to statutory and regulatory limitations. Fair Market Value: What a qualified buyer will pay for goods, services, or property. FAQs: Frequently Asked Questions (FAQs) Feedback: Your comments on the quality of the material you receive at this website. Your feedback is important to us and we also ask you to rate our site. Financial Forecast: Projection of revenues and expenses for the next one to five years. Financial Plan: An outline for how to use the money (capital) you have and how to raise the money you will need. Financial Ratios: Measures of capital, including debt to asset, current, and debt to worth. See individual definitions for "acid," "current," "quick" ratios. Financial Reports: Reports commonly required from applicants request for financial assistance, e.g.: Balance Sheet -A report of the status of a firm's assets, liabilities and owner's equity at a given time. Financing: New funds provided to a business, by either loans or purchase of debt securities or capital stock. Five "Cs" Of Credit: A system used by lending officers to evaluate a loan application: Character, Cash Flow, Collateral, Capitalization and Conditions. See individual definitions. Fixed Assets: Equipment, buildings, etc., which are purchased and used for long-term purposes. Fixed Costs: Costs of doing business such as rent, utilities, depreciation, taxes, etc., that remain generally the same regardless of the amount of sales of goods or services. Flow Chart: A graphical representation for the definition, analysis, or solution of a problem, in which symbols are used to represent operations, data, flow, equipment, etc. Foreclosure: The act by the mortgagee or trustee upon default, in the payment of interest or principal of a mortgage of enforcing payment of the debt by selling the underlying security. Franchising: A continuing relationship in which the franchisor provides a licensed privilege to the franchisee to do business, and offers assistance in organizing, training, merchandising, marketing and managing in return for a consideration. Franchising is a form of business by which the owner (franchisor) of a product, service or method obtains distribution through affiliated dealers(franchisees). The product, method or service being marketed is usually identified by the franchisor's brand name, and the holder of the privilege (franchisee) is often given exclusive access to a defined geographical area. Freedom Of Information Act (FOIA): The FOIA, enacted in 1966, generally provides that any person has a right of access to federal agency records. This right of access is enforceable in court except for those records that are protected from disclosure by the nine exemptions to the FOIA.
Geographic Targeting: Specializing in serving the needs of customers in a particular area, thus restricting advertising and other marketing efforts to that area. Goodwill: An intangible asset of a business that relates to a favorable relationship with customers, and excess earning power. Income Statement: Financial statement showing a company's sales, expense and net income or loss for a specific period of time. Incubator: A facility designed to encourage entrepreneurship and minimize obstacles to new business formation and growth, particularly for high technology firms, by housing a number of fledgling enterprises that share an array of services. These shared services may include meeting areas, secretarial services, accounting services, research libraries, on-site financial and management counseling and word processing facilities. Independent and Qualified Public Accountants: Public accountants are independent when neither they nor any of their family have a material, direct or indirect financial interest in the borrower other than as an accountant. Industrial Revenue Bond (IRB): A tax-exempt bond issued by a state or local government agency to finance industrial or commercial projects that serve a public good. The bond usually is not backed by the full faith and credit of the government that issues it, but is repaid solely from the revenues of the project and requires a private sector commitment for repayment. Industry: Concerns primarily engaged in the same kind of economic activity are classified in the same industry regardless of their types of ownership. Innovation: Introduction of a new idea into the marketplace in the form of a new product or service, or an improvement in organization or process. Insolvency: The inability of a borrower to meet financial obligations as they mature, or having insufficient assets to pay legal debts. Installment Loan: One in which the amount of interest is added to the principal and repaid by the borrower in equal periodic payments. Interest: An amount paid a lender for the use of funds. Intermediaries: Intermediaries are organizations that play a fundamental role in encouraging, promoting, and facilitating business-to-business relationships and mentor-protégé partnerships. Intermediary Organization: Organizations that play a fundamental role in encouraging, promoting, and facilitating business-to-business linkages and mentor-protégé partnerships. These can include both nonprofit and for-profit organizations: chambers of commerce; trade associations; local, civic, and community groups; state and local governments; academic institutions; and private corporations. Inventory: Merchandise that is purchased and/or produced and stored for eventual sale. Inventory Turnover: How often the inventory is sold and replenished over the course of a year. Inverse Order Of Maturity: When payments are received from borrowers that are larger than the authorized repayment schedules the overpayment is credited to the final installments of the principal which reduces the maturity of the loan and does not affect the original repayment schedule. Investment Banking: Businesses specializing in the formation of capital. This is done by outright purchase and sale of securities offered by the issuer, standby underwriting or "best efforts selling." Invitation For Bids: Formal solicitations for offerings, to perform procurements by competitive bids when the specifications describe the requirements of the government clearly, accurately, and completely; but avoiding unnecessarily restrictive specifications or requirements which might unduly limit the number of bidders. Joint Venture: In a joint venture both firms share, in some proportion, the responsibility and the profits or loss on a contract. They are considered affiliated (see "Affiliates," above) for the purpose of that contract. Normally, the revenues or the employees of both firms are added together to determine the size of a joint venture. Judgment: Judicial determination of the existence of an indebtedness, or other legal liability. Judgment By Confession: The act of debtors permitting judgment to be entered against them for a given sum with a statement to that effect, without the institution of legal proceedings. Junk Bond: A high-yield corporate bond issue with a below-investment rating that became a growing source of corporate funding in the 1980s. Lease: A contract between the owner (lessor) and the tenant (lessee) stating the conditions under which the tenant may occupy or use real estate or equipment. Terms usually include a specific period of time and a predetermined rate. Lease Rate: The period rental payment to a lessor for the use of assets. It may also be considered as the implicit interest rate in minimum lease payments. Legal Rate of Interest: The maximum rate of interest fixed by the laws of the various states, which a lender may charge a borrower for the use of money. Lending Institution: Any institution, including a commercial bank, savings and loan association, commercial finance company, or other lender qualified to participate with SBA in the making of loans. Lessee: The user of equipment or property being leased. Lessor: The party to a lease agreement who has leagl or tax title to equipment or property, who grants the lessee the right to use the equipment or property for the lease term, and who is entitled to the rental fees. Leveraged Buy-Out: The purchase of a business, with financing provided largely by borrowed money, often in the form of junk bonds. Liability: Debt owed by the company such as bank loans or accounts payable. Lien: A charge upon or security interest in real or personal property maintained to ensure the satisfaction of a debt or duty ordinarily arising by operation of law. Line Of Credit: A short-term loan, usually less than one year. Liquid Assets: Cash, checks and easily-convertible securities available to meet immediate and emergency needs. Liquidation: The disposal, at maximum prices, of the collateral securing a loan, and the voluntary and enforced collection of the remaining loan balance from the obligators and/or guarantors. Liquidation Value: The net value realizable in the sale (ordinarily a forced sale) of a business or a particular asset. Listserver: A service where in individuals can subscribe to and receive publications by electronic mail. Litigation: Refers to a loan in "liquidation status" which has been referred attorneys for legal action. Also: The practice of taking legal action through the judicial process. Loan Agreement: Agreement to be executed by borrower, containing pertinent terms, conditions, covenants and restrictions. Loan Payoff Amount: The total amount of money needed to meet a borrower's obligation on a loan. It is arrived at by accruing gross interest for one day and multiplying this figure by the number of days that exist between the date of the last repayment and the date on which the loan is to be completely paid off. This amount, known as accrued interest, is combined with the latest principal and escrow balances that are applicable to what is now referred to as the loan payoff amount. In the case where prepaid interest exceeds the accrued interest the latter is subtracted from the former and the difference is used to reduce the total amount owed. Long Term: Period usually greater than one year. Loss Rate: A rate developed by comparing the ratio of total loans charged off to the total loans disbursed from inception of the program to the present date. Loss Reserve Adjustment Rate: A reserve rate based upon the ratio of the aggregate net chargeoffs (chargeoffs less recoveries) for the most recent five years to the total average loans outstanding for the comparable 5-year period. Market: The existing or potential buyers for specific goods or services. Market Value: What a willing buyer will pay for goods, services, a property or a business. Marketing: The total of activities involved in the transfer of goods and services from the producer or seller to the consumer or buyer. Marketing activities may include buying, storing selling, advertising, pricing and promoting products. Markup: Markup is the difference between invoice cost and selling price. It may be expressed either as a percentage of the selling price or the cost price and is supposed to cover all the costs of doing business plus a profit. Whether markup is based on the selling price or the cost price, the base is always equal to 100 percent. Maturity: The date on which a loan becomes due. Maturity Extensions: Extensions of payment beyond the original period established for repayment of a loan. Mentor: A business, usually large, or other organization that has created a specialized program to advance strategic relationships with small businesses. Merger: A combination of two or more corporations wherein the dominant unit absorbs the passive ones, the former continuing operation usually under the same name. In a consolidation two units combine and are succeeded by a new corporation, usually with a new title. Microenterprise Development: The mission of the Interagency Workgroup on Microenterprise Development is to better coordinate the work of federal agencies involved in microenterprise efforts and to develop a coherent framework for federal government efforts to promote microenterprise. Microloan Program: The MicroLoan Program provides very small loans to start-up, newly established, or growing small business concerns. Under this program, SBA makes funds available to nonprofit community based lenders (intermediaries) which, in turn, make loans to eligible borrowers in amounts up to a maximum of $35,000. The average loan size is about $10,500. Applications are submitted to the local intermediary and all credit decisions are made on the local level. Mortgage: An instrument giving legal title to secure the repayment of a loan made by the mortgagee (lender). In legal contemplation there are two types: (1) title theory -operates as a transfer of the legal title of the property to the mortgagee, and (2) lien theory -creates a lien upon the property in favor of the mortgagee. Natural Resources Assistance Program: The federal government sells large quantities of natural resources and surplus real and personal property authorized for sale in accordance with public law. Negative Net Worth: A business condition when total liabilities exceed total assets. Negotiated Grievance Procedure: The sole and exclusive procedure available to all employees in a bargaining unit and the employer for processing grievances and disputes. Negotiation: Contracting through the use of either competitive or other-than-competitive proposals and discussions. Any contract awarded without using sealed bidding procedures is a negotiated contract. Negotiation Dispute: That point in negotiations where labor and management cannot come to an agreement on some or all of the issues on the bargaining table and the services of the FMCS have not been utilized. Net Worth: Property owned (assets), minus debts and obligations owed (liabilities), is the owner's equity (net worth). North American Industry Classification System (NAICS): The North American Industry Classification System (NAICS) is replacing the U.S. Standard Industrial Classification (SIC) system. NAICS will reshape the way we view our changing economy. NAICS was developed jointly by the U.S., Canada, and Mexico to provide new comparability in statistics about business activity across North America. Not Dominant: A concern is not dominant in its field of operation when it does not exercise a controlling or major influence on an industry. As part of its review of a size standard, SBA investigates if a concern at or below a particular standard would be dominant in the industry, on a national basis. Thus, a concern at or below the size standard is presumed not to be dominant in its field of operation. Notes and Accounts Receivable: A secured or unsecured receivable evidenced by a note or open account arising from activities involving liquidation and disposal of loan collateral. Obligations: Technically defined as "amount of orders placed, contracts awarded, services received, and similar transactions during a given period which will require payments during the same or a future period." Also, another term for debt: money, merchandise or service owed to someone. Office Of Small & Disadvantaged Business Utilization (OSDBU): Federal Offices of Small and Disadvantaged Business Utilization (OSDBUs) offer small business information on procurement opportunities, guidance on procurement procedures, and identification of both prime and subcontracting opportunities. Ordering Costs: dministrative costs of placing, tracking, shipping, receiving and paying for an order. Ordinary Interest: Simple interest based on a year of 360 days, contrasting with exact interest having a base year of 365 days. OSHA (Occupational Safety & Health Act): To assure safe and healthful working conditions for working men and women; by authorizing enforcement of the standards developed under the Act; by assisting and encouraging the States in their efforts to assure safe and healthful working conditions; by providing for research, information, education, and training in the field of occupational safety and health; and for other purposes. Outlays: Net disbursements (cash payments in excess of cash receipts) for administrative expenses and for loans and related costs and expenses (e.g., gross disbursements for loans and expenses minus loan repayments, interest and fee income collected, and reimbursements received for services performed for other agencies).
Partnering: A mutually beneficial business-to-business relationship based on trust and commitment and that enhances the capabilities of both parties. Quick Ratio: Current assets less inventories divided by current liabilities. Also called "acid ratio." Ratio: Denotes relationships of items within and between financial statements, e.g., current ratio, quick ratio, inventory turnover ratio and debt/net worth ratios. Receivable Conversion Period (RCP): Time btween the sale of the final product on credit and cash rescipts for the accounts payable. Regulatory Flexibility Act (RFA): The Regulatory Flexibility Act (5 U.S.C. 601-612) requires federal agencies to consider the effects of their regulatory actions on small businesses and other small entities and to minimize any undue disproportionate burden. The chief counsel for advocacy of the U.S. Small Business Administration is charged with monitoring federal agencies' compliance with the act and with submitting an annual report to Congress. Request For Proposal (RFP): A solicitation issued by the government to prospective offerors. An RFP describes what the government requires and how the offerors will be evaluated. Negotiations may be conducted with offers. Award is based on a combination of lowest price and technical merit. Request For Proposals: Solicitations for offerings for competitive negotiated procurements when it is impossible to draft an invitation for bids containing adequate detailed description of the required property and services. There are 15 circumstances in the Federal Acquisition Regulations (FAR) which permit negotiated procurements. Request For Quotation (RFQ): A request for market information by the government, used for planning purposes. Return On Investment: The amount of profit (return) based on the amount of resources (funds) used to produce it. Also, the ability of a given investment to earn a return for its use. Revolving Credit Account: A formal line of credit offered to larger businesses in exchange for up-front fees and standard interest payments. RFP (Request For Proposal): A solicitation issued by the government to prospective offerors. An RFP describes what the government requires and how the offerors will be evaluated. Negotiations may be conducted with offers. Award is based on a combination of lowest price and technical merit. RFQ (Request For Quotation): A request for market information by the government, used for planning purposes. SBA (Small Business Administration): An independent agency of the federal government and not to be confused with Small Business Association or variations thereof. The U.S. Small Business Administration (SBA) was created by Congress in 1953 to help America's entrepreneurs form successful small enterprises. SBA Loan: The SBA enables its lending partners to provide financing to small businesses when funding is otherwise unavailable on reasonable terms by guaranteeing major portions of loans made to small businesses. SBAExpress: The SBAExpress - Makes it easier and faster for lenders to provide small business loans of $150,000 or less; allows lenders to use their own forms and processes to approve loans guaranteed by the U.S. Small Business Administration; provides a rapid response from the SBA - within 36 hours of receiving your complete application; lets lenders take advantage of electronic loan processing; and helps lenders provide smaller revolving loans. SBIR Contract (Small Business Innovative Research Contract): A type of contract designed to foster technological innovation by small businesses with 500 or fewer employees. The SBIR contract program provides for a three-phased approach to research and development projects: technological feasibility and concept development; the primary research effort; and the conversion of the technology to a commercial application. SCORE: A volunteer association sponsored by the SBA. SCORE matches volunteer business-management counselors with present prospective small business owners in need of expert advice. Secondary Market: Entities who purchase an interest in a loan from an original lender, such as banks, institutional investors, insurance companies, credit unioins and pension funds. Selling a Business: Selling a business is different than selling any other asset because a business is more than an income-earning asset -- it is a life-style as well. Therefore, the decision to sell can be emotional. Personal ambitions should be weighed against economic consequences in reaching a decision. Service Mark: A word, name, symbol or device used to identify and distinguish a business that provides services rather than goods. Like a trademark, it can be registered. Shareware: Free or evaluation computer software. Short Term: Period usually one year or less. Signage: Effective signage is a critical component of your retail business' success, and can contribute to the success of all businesses. To provide in depth information about signage and your business, we have divided signage information into categories in our Signage web area. Simple Interest Rate Loan: One which provides the borrower the face value of the loan; the borrower repays the principal plus interest at maturity. Size Standards: The term "size standard" describes the numerical definition of a small business. In other words, a business is considered "small" if it meets or is below an established "size standard." Small Business: A business smaller than a given size as measured by its employment, business receipts, or business assets. Small Business Development Center (SBDC): The SBDC is a center for the delivery of joint government, academic and private sector services for the benefit of small business and the national welfare. It is committed to the development and productivity of business and the economy in specific geographical regions. Small Business Innovation Research (SBIR) Contract: A type of contract designed to foster technological innovation by small businesses with 500 or fewer employees. The SBIR contract program provides for a three-phased approach to research and development projects: technological feasibility and concept development; the primary research effort; and the conversion of the technology to a commercial application. Small Business Investment Company (SBIC): SBICs, licensed by the Small Business Administration, are privately owned and managed investment firms. They are participants in a vital partnership between government and the private sector economy. With their own capital and with funds borrowed at favorable rates through the Federal Government, SBICs provide venture capital to small independent businesses, both new and already established. Small Business Technology Transfer Program (STTR): STTR is an important new small business program that expands funding opportunities in the federal innovation research and development arena. Central to the program is expansion of the public/private sector partnership to include the joint venture opportunities for small business and the nation's premier nonprofit research institutions. STTR's most important role is to foster the innovation necessary to meet the nation's scientific and technological challenges in the 21st century. Small Disadvantaged Business (SDB): SBA certifies SDBs to make them eligible for special bidding benefits. SDBs are at least 51 percent owned by one or more individuals who are both socially and economically disadvantaged. This can include a publicly owned business that has at least 51 percent of its stock unconditionally owned by one or more socially and economically disadvantaged individuals and whose management and daily business is controlled by one or more such individuals. Solvency: The financial ability to continue business. SOPS: Standard Operating Procedures. Speculative Cash Balances: Cash necessary to take advantage of special opportunities. Standard Industrial Classification (SIC) Code: A code representing a category within the Standard Industrial Classification System administered by the Statistical Policy Division of the U.S. Office of Management and Budget. The system was established to classify all industries in the US economy. A two-digit code designates each major industry group, which is coupled with a second two-digit code representing subcategories. Subcontract: A contract between a prime contractor and a subcontractor to furnish supplies or services for the performance of a prime contract or subcontract. Surety Bond: A three-way agreement between a surety company, a contractor and the project owner. If the contractor fails to comply with the contract, the surety assumes responsibility and ensures that the project is completed. Taxes: The contribution required of persons, groups, or businesses within a governmental jurisdiction for the support of governmental programs. Tech-Net: Tech-Net is an electronic gateway of technology information and resources for and about small high tech businesses. It is a search engine for researchers, scientists, state, federal and local government officials, a marketing tool for small firms and a potential "link" to investment opportunities for investors and other sources of capital. Trade Name: The term used to identify a company. Any type of business may call itself a company. Trademark: Words, names, symbols or devises, or any combination of these, used to identify the goods of a business and to distinguish these goods from the goods of others. Transaction Balances: Cash held to cover day-to-day transactions. Treasury Bills (T-Bills): Short term obligations of the U.S. government. True Lease: A type of transaction that qualifies as a lease under the Internal Revenue Code. It allows the lessor to claim ownership and the lessee to claim rental payments as tax deductions. Turnover: Turnover is the number of times that an average inventory of goods is sold during a fiscal year or some designated period. Care must be taken to ensure that the average inventory and net sales are both reduced to the same denominator; that is, divide inventory at cost into sales at cost into sales at cost or divide inventory at selling price into sales at selling price. The turnover when accurately computed, is one measure of the efficiency of a business. U.S. Export Assistance Centers (USEACS): USEACs offer a full range of federal export programs and services from a number of federal agencies under one roof. Find your closest USEAC at SBA's International Trade website. Undelivered Orders: The amount of orders for goods and services outstanding for which, the liability has not yet accrued. For practical puproses represents obligations incurred for which goods have not been delivered or services not performed. Unfair Labor Practice: Action by either the employer or the union which violates the provisions of Executive Order 11491 as amended. Uniform Commercial Code: Codification of uniform laws concerning commercial transactions. In SBA parlance generally refers to a uniform method of recording and enforcing a security interest or charge upon existing or to be acquired personal property. Usury: Interest which exceeds the legal rate charged to a borrower for the use of money. Variable Costs: Those costs of doing business such as cost of goods, shipping, handling and storage, sales commissions, etc., which are directly related to the sales of goods or services. Vendor Identification Program (VIP): The Vendor Identification Program (VIP) assists small businesses by identifying government purchasers for the items they produce for large defense contractors. Venture Capital (VC): Money used to support new or unusual commercial undertakings; equity, risk or speculative capital. This funding is provided to new or existing firms that exhibit above-average growth rates, a significant potential for market expansion and the need for additional financing for business maintenance or expansion. Very Small Business Program (VSB): The Very Small Business (VSB) program is an extension of the small business set-aside program, administered by SBA as a pilot to increase opportunities for VSB concerns. Procurement requirements, including construction requirements, estimated to be between $2,500 and $50,000 must be reserved for eligible VSB concerns in designated pilot SBA districts. Workers' Compensation: A state-mandated form of insurance covering workers injured in job-related accidents. In some states the state is the insurer; in other states insurance must be acquired from commercial insurance firms. Insurance rates are based on a number of factors including salaries, firm history and risk of occupation. Working Capital: Cash and short-term assets that can be used for current needs -- bills, etc. Zip: files compressed for web downloading or archiving. A common utility is needed to uncompress/decompress the zipped files.
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Business Tip #110 Don't skip the plan! Of course, the biggest mistake of all is failing to create a business plan in the first place. Planning is hard work, and there's no guarantee it will make your business succeed. |
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