Small Business Vocabulary You Need to Know
Whether you’re a business veteran or trying to launch a start-up you’ve probably come to realize that there are countless terms, titles, and words that are specific to the business world. Possessing a well-rounded business world vocabulary will allow you to excel at your job and benefit from having the knowledge you need to run your business as smoothly as possible. This is why we’ve compiled a list of all the business vocabulary that you need to know.
Creditworthiness is something lenders use to determine whether a potential borrower is, in fact, able to repay a debt. Creditworthy individuals typically have good credit histories that illustrate their responsible use of credit in the past.
These are the costs that a business must always pay no matter what is happening within the company during a relevant period of time. An example of a fixed cost would be the rent and utilities a business must pay to have a storefront.
A secured loan is a loan that is backed by collateral. Collateral is a form of security for the lender, it acts as a second source of repayment should the borrower become unable to make their loan payments. Typically business collateral is equipment, accounts receivable, real-estate or even inventory.
Private investors or Angel Investors
This is an investor who has nothing to do with the business they are investing in and usually wishes to remain anonymous. More often than not an Angel Investor invests in a local business for personal (maybe a friend or family member owns the business) or financial (to make money) reasons.
The liabilities of a business are debts it owes. This includes loans, mortgages, accounts payable, deferred revenues and accrued expenses.
Any item that is owned by a business that has economic value, this could be real-estate, equipment or inventory.
The expenses that result from the daily operation of a business.
Line of credit
A line of credit is similar to a credit card in that a business is able to borrow up to a certain amount of money whenever they need it and interest is only charged on the money that is actually used. For example, a business can have a $50,000 line of credit but only needs $5,000 to purchase new inventory, the business will only be charged interest on $5,000 and once they repay it they’ll be able to use it again if they need to.
The current fiscal value of a business, subtract a business’s liabilities from its assets to find out what its net worth is.
An unsecured loan is the opposite of a secured loan; it is not backed up by any collateral. Unsecured loans are typically harder to be approved for.
Start-up costs are the expenses associated with starting a business. These are one-time only expenses.
Money that is borrowed from a lender that must be repaid within a year or less.
These are expenses that aren’t fixed; they change depending on the current state of the business. There could be more or less variable costs in one month depending on the sales that the business has.
These are investors that invest their own money into a business for a certain percentage of ownership. This is a riskier type of investment as the business could fail and they could lose the money they invested.
Capital that is borrowed from a lender and can be paid back over a long period of time, typically longer than a year.
Any costs that accrue while a business is operational.
These are professionals who invest money to make more money. They look for a new or up and coming business that has the potential for growth.
All companies should have a contingency fund, it is money set aside to cover any unexpected costs associated with running a business.
A plan that indicates how long it will take a business to repay their debts.