Introduction
Welcome to the Funding Guru Glossary, the ultimate resource for knowledge of important financial terms pertaining to alternative funding options, property finance, and business funding. It can be difficult to navigate the complexities of finance, which is why we have put together simple definitions that will benefit professionals, investors, and entrepreneurs alike.
This glossary is your essential partner whether you’re looking into funding options, making calculated financial decisions, or just trying to improve your financial literacy.
Amortization : Gradual repayment of a loan over time through scheduled payments, covering both interest and principal.
Asset Finance : Funding that lets businesses purchase or lease equipment while spreading the cost over time.
APR (Annual Percentage Rate) : Total yearly cost of borrowing, expressed as a percentage, including interest and any fees.
Angel Investor : An individual who provides capital to early-stage businesses in exchange for equity or convertible debt.
Accounts Receivable : Money owed to a business by its customers for products or services delivered on credit.
Acquisition Financing : Funding used specifically to buy another business or significant assets.
Audit : An independent examination of financial records to ensure accuracy and regulatory compliance.
Arrears : Unpaid or overdue debt that should have been paid earlier.
Asset Valuation : The process of determining the fair market value of a company’s assets.
Accelerator Program : A structured program that supports early-stage startups with mentoring, investment, and networking.
Bridging Loan : A short-term loan used until a business secures permanent financing or removes an obligation.
Business Credit Score : A numerical representation of a business’s creditworthiness based on payment history and financial data.
Bootstrapping : Starting and growing a business using personal finances or internal revenue instead of external funding.
Buy-to-Let Mortgage : A loan for purchasing property intended for rental income rather than personal use.
Break-Even Point : The stage where total revenue equals total costs, resulting in neither profit nor loss.
Balloon Payment : A large final payment due at the end of a loan term, after smaller periodic payments.
Balance Sheet : A financial statement showing a company’s assets, liabilities, and equity at a specific point in time.
Business Plan : A formal document outlining a company’s goals, strategies, and financial projections.
Bankruptcy : A legal process involving a person or business unable to repay outstanding debts.
Business Loans : General-purpose funding provided to companies for working capital, growth, or operational expenses.
Business Consultation: A strategy session offered to assess financial needs and suggest tailored funding solutions.
Business Grant : Non-repayable funds provided by the government or organisations to support business growth or innovation.
Collateral : Assets pledged by a borrower to secure a loan, reducing the lender’s risk.
Credit Line : A flexible loan that allows businesses to borrow up to a certain limit as needed.
Cash Flow : The net amount of money moving in and out of a business over a period.
Crowdfunding : Raising small amounts of money from a large number of people, typically via the internet.
Credit Score : A numerical rating representing an individual’s creditworthiness based on their credit history.
Convertible Note : A short-term debt that converts into equity during a future financing round.
Capital Expenditure : Funds used by a business to acquire or upgrade physical assets like buildings or machinery.
Cost of Capital : The return a company needs to earn on its investment to maintain market value and attract investors.
Covenant : A condition in a loan agreement that requires the borrower to fulfill specific obligations.
Commercial Loan : A loan issued to a business rather than an individual, usually for operational or capital expenses.
Commercial Mortgage: A loan used to buy or refinance property used for business operations
Debt Financing : Raising capital by borrowing, typically via loans or bonds, that must be repaid with interest.
Due Diligence : A detailed investigation into a business’s finances, operations, and risks before investment or acquisition.
Depreciation : Reduction in the value of an asset over time, typically due to wear and tear.
Dividend : A portion of a company’s profits distributed to shareholders.
Default : Failure to repay a loan according to agreed terms.
Development Finance : Short-term funding used to build or renovate property.
Drawdown : The act of accessing funds from an approved loan facility.
Debt Consolidation : Combining multiple debts into a single loan with better terms or lower interest.
Disbursement : The payment of funds from a lender to a borrower or service provider.
DSCR (Debt Service Coverage Ratio) : A financial metric used to evaluate a company’s ability to repay debt.
Equity Finance : Raising money by selling shares of the business rather than incurring debt.
Exit Finance: A bridge or refinancing loan that pays off development finance once the project nears completion.
Exit Strategy : A planned approach to exiting an investment or business, often through sale or IPO.
EIS (Enterprise Investment Scheme) : A UK government initiative offering tax relief to investors in high-risk startups.
Earnings Before Interest and Tax (EBIT) : A measure of a company’s profitability excluding interest and tax expenses.
Escrow : A financial arrangement where a third party holds funds until certain conditions are met.
Early Repayment Fee : A charge for repaying a loan before its scheduled end date.
EBITDA : Earnings before interest, tax, depreciation, and amortization; used to evaluate operational performance.
Equity Stake : The percentage of a business owned by an investor through shares.
Economic Moat : A company’s sustainable competitive advantage that protects it from competitors.
E-commerce Loan : Financing tailored to online businesses for inventory, marketing, or expansion needs.
Factoring : A financing method where businesses sell invoices to a third party at a discount for immediate cash.
Fixed Asset : Long-term assets like buildings and machinery used in business operations.
Franchise Financing : Loans or funding solutions tailored for purchasing or growing a franchise business.
Financial Forecast : A prediction of future revenues, expenses, and profits over a given period.
Floating Rate : An interest rate that varies over time based on market conditions.
Fundraising : The process of seeking financial support for a business or project from investors or donors.
FICO Score : A widely used credit score model in the U.S. to assess credit risk.
Feasibility Study : An assessment of the practicality and profitability of a proposed business idea or project.
Fiscal Year : A 12-month period used by companies for accounting and financial reporting.
Funding Round : A stage of investment where startups raise capital from angel investors, VCs, or other sources.
Grant : Non-repayable funds provided by governments or institutions for business projects or innovation.
Gross Profit : Revenue minus the cost of goods sold, showing profitability before operating expenses.
Guarantor : A person or entity that agrees to repay a loan if the primary borrower defaults.
Growth Capital : Investment in a business to expand operations, enter new markets, or fund acquisitions.
Government-Backed Loan : A loan guaranteed partially or fully by the government to reduce lender risk.
Gearing Ratio : Measures a company’s financial leverage, comparing debt to equity.
Green Loan : A loan specifically designated for environmentally sustainable projects or upgrades.
Gross Margin : The difference between revenue and cost of goods sold, expressed as a percentage.
Gap Financing : Short-term funding used to cover an immediate need while waiting for long-term financing.
Going Concern : An accounting term for a business that is expected to continue operating in the foreseeable future.
Hire Purchase : A financing method where a business pays for an asset in installments while using it and gains ownership after final payment.
Holding Company : A company that owns shares in other companies to control them, but doesn’t produce goods or services itself.
Hard Credit Check : A lender’s formal inquiry into your credit report, which can temporarily impact your credit score.
Hedge Fund : A pooled investment fund using various strategies to earn returns for investors, often requiring high minimum investments.
Hybrid Financing : A funding structure combining elements of debt and equity, such as convertible bonds.
High-Net-Worth Individual (HNWI) : A person with significant investable assets, often targeted by private banking and investment firms.
Home Equity Loan : A loan secured against the value of a borrower’s home, often used for business or personal funding needs.
Holding Period : The time an investor holds an asset before selling, impacting tax treatment or returns.
Hostile Takeover : Acquisition of a company against the wishes of its management, typically by purchasing a majority of shares.
Hypothecation : Using an asset as collateral for a loan while retaining ownership until default.
Invoice Finance: Unlocking cash tied up in unpaid invoices by selling them to a third-party lender.
Initial Public Offering (IPO) : The first time a private company offers its shares to the public via a stock exchange.
Interest Rate : The percentage charged on a loan or earned on an investment over time.
Insolvency : A state where a business or individual cannot pay debts as they come due.
Institutional Investor : Large organisations like pension funds or insurance companies that invest significant capital in businesses.
IRR (Internal Rate of Return) : A financial metric estimating the profitability of potential investments.
Investment Portfolio : A collection of assets such as stocks, bonds, and funds held by an investor or institution.
Incorporation : The legal process of forming a corporate entity separate from its owners.
Inflation : The rate at which the general level of prices for goods and services rises, eroding purchasing power.
Income Statement : A financial document showing a company’s revenue, expenses, and profit over a period.
Joint Venture : A business agreement where two or more parties collaborate on a project, sharing resources and profits.
Junk Bonds : High-risk, high-yield corporate bonds rated below investment grade.
Joint Liability : A legal term indicating two or more parties share responsibility for a financial obligation.
Judgment Lien : A court ruling allowing a creditor to claim a debtor’s property for unpaid debts.
Job Costing : Tracking all costs associated with a specific project or job to determine profitability.
Junior Debt : Debt that is lower in repayment priority than senior debt, often with higher interest to reflect risk.
Just-in-Time Inventory : Inventory strategy that reduces holding costs by receiving goods only when needed.
Jobber : An individual or firm that buys goods in bulk and resells them to retailers or smaller businesses.
Journal Entry : A record in accounting that logs a transaction in the financial system.
Joint Account : A financial account shared by two or more individuals, allowing equal access and responsibility.
KPI (Key Performance Indicator) : A measurable value that shows how effectively a company is achieving business objectives.
KYC (Know Your Customer) : A regulatory process to verify a customer’s identity before providing financial services.
Kickback : An illicit payment made in return for facilitating a transaction or business deal.
Keyman Insurance : A life insurance policy taken out by a business on a critical team member whose loss would affect operations.
Keogh Plan : A U.S. retirement plan for self-employed individuals and small businesses, similar to a 401(k).
Knowledge Process Outsourcing (KPO) : Outsourcing high-level tasks like analysis, R&D, or legal work to external providers.
Knock-In Option : A type of derivative that becomes active only when the underlying asset reaches a specified price.
Knock-Out Option : A derivative that becomes void once the underlying asset reaches a specific barrier price.
Kiting : Illegal use of bank float to exploit time between check deposit and withdrawal for temporary cash.
K-1 Schedule : A tax document issued to investors in partnerships showing income, losses, and dividends.
Line of Credit : A revolving loan allowing access to funds up to a set limit, used as needed.
Liquidity : The ease with which an asset can be converted into cash without affecting its value.
Leverage : Using borrowed funds to increase the potential return on investment.
Loan-to-Value (LTV) Ratio : A measure of how much a lender is willing to finance relative to the asset’s value.
Letter of Credit : A bank-issued document guaranteeing a buyer’s payment to a seller in trade transactions.
Limited Liability Company (LLC) : A business structure offering personal liability protection and pass-through taxation.
Liability : A financial obligation or debt owed by a business or individual.
Leaseback : A financial arrangement where a company sells an asset and leases it back to retain usage.
Liquidation : The process of converting assets into cash, often during bankruptcy or closure.
Line Item : A single entry in a budget or financial report that details a specific expense or revenue stream.
Merchant Cash Advance: A lump-sum payment to a business repaid via a percentage of daily card sales.
Market Capitalisation : The total value of a company’s outstanding shares, calculated by stock price times shares.
Mezzanine Financing : A hybrid of debt and equity financing, often used for expansion with subordinated repayment rights.
Microloan : A small, short-term loan offered to startups or small businesses, often by nonprofits or government agencies.
Monetisation : Turning an asset, website, or service into a source of revenue.
Minimum Viable Product (MVP) : A basic version of a product launched to test market demand and collect user feedback.
Mortgage : A loan secured by real estate, used to buy, refinance, or develop property.
Mutual Fund : An investment vehicle pooling money from multiple investors to buy diversified assets.
Management Buyout (MBO) : A company’s management team purchasing the business from its current owners.
Margin Call : A broker’s demand for an investor to deposit additional funds to cover potential losses in a margin account.
Net Income : The total profit after all expenses, taxes, and costs have been deducted from a company’s revenue.
Net Worth : The value of assets owned minus liabilities owed; a measure of financial health.
Non-Recourse Loan : A loan secured by collateral where the lender can’t pursue additional compensation beyond the asset.
Negotiable Instrument : A written document guaranteeing payment, like a check or promissory note.
NDA (Non-Disclosure Agreement) : A legal contract that protects confidential business information from being disclosed.
Negative Equity : When a business’s liabilities exceed the value of its assets, often in property or investments.
Net Present Value (NPV): The value of future cash flows discounted to present value, used in investment evaluation.
Non-Bank Lender : A financial institution that offers loans without being a traditional bank.
Non-Dilutive Funding : Capital received without giving up equity, such as grants or revenue-based financing.
Net Operating Income (NOI) : A property’s income after operating expenses, used to evaluate real estate investments
Operating Expenses : Day-to-day business costs excluding the cost of goods sold, such as rent and utilities.
Overdraft : A facility allowing businesses to withdraw more than their bank account balance, up to a set limit.
Options : Financial contracts giving the right, but not obligation, to buy or sell an asset at a specific price.
Ownership Equity : The owner’s claim on the business after all liabilities are subtracted from total assets.
Off-Balance Sheet Financing : Assets or liabilities not listed on a company’s balance sheet, often via leases or partnerships.
Opportunity Cost : The value of the next best alternative that is foregone when a choice is made.
Offering Memorandum : A legal document shared with potential investors detailing investment terms and risks.
Operating Cash Flow : Cash generated from a company’s core business operations, excluding investing or financing activities.
Overhead : Ongoing business expenses not tied to producing a specific product or service.
Operational Risk : The potential for loss from inadequate systems, processes, or external events affecting operations.
Principal : The original sum borrowed or invested, excluding interest or returns.
Private Equity : Investment in private companies through direct ownership or buyouts, not traded publicly.
Pitch Deck : A presentation that outlines a startup’s business plan and funding needs for potential investors.
Pre-Seed Funding : Initial capital raised before product development to validate an idea and prepare for launch.
Profit Margin : The percentage of revenue remaining after all costs are deducted; a measure of profitability.
Promissory Note : A written promise to repay a specific sum of money on a certain date or demand.
Portfolio Diversification: The practice of spreading investments across assets to reduce risk.
Par Value : The nominal value of a bond or share, unrelated to market value.
Payment Terms : Agreed conditions on how and when payment will be made in business transactions.
Peer-to-Peer Lending : Borrowing and lending between individuals through online platforms, without banks.
Quarterly Report : A summary of a company’s financial performance issued every three months to investors.
Quick Ratio : A liquidity metric that measures a company’s ability to cover short-term obligations with its most liquid assets.
Qualified Investor : An individual or entity meeting specific criteria to invest in advanced or risky opportunities.
Quotation : A formal document providing price estimates for goods or services offered.
Quiet Period : The time before a public offering when companies must limit promotional communication.
Qualifying Criteria : The specific requirements a borrower must meet to be eligible for funding or services.
Quorum : The minimum number of members needed at a meeting to make its decisions valid.
Quantitative Easing : A central bank policy of injecting money into the economy by purchasing government securities.
QuickBooks : A widely used accounting software for small and medium-sized businesses.
Quota : A fixed share or target in sales or production, often used in budgeting or management.
Revenue : The total income generated by a business from its operations, before expenses.
Refinancing : Replacing an existing loan with a new one, often with better terms or interest rates.
R&D Tax Credits : Government incentives that reimburse businesses for expenses related to research and development.
Receivables : Money owed to a company by its customers, usually from invoices or sales on credit.
Return on Investment (ROI) : A performance metric showing the profitability of an investment as a percentage.
Retained Earnings : Profits not distributed as dividends but kept in the business for growth or debt repayment.
Recapitalisation : Restructuring a company’s debt and equity mixture to improve stability or fund expansion.
Risk Capital : Funds allocated to high-risk, high-reward ventures, typically by venture capitalists.
Redemption : The repayment or exchange of a bond or investment before or at maturity.
Royalty : A payment made to a rights holder for the use of intellectual property or resources..
Secured Loan : A loan backed by collateral, such as property or equipment, which reduces lender risk.
Secured Business Loan : A loan backed by business assets, often offering lower interest rates due to reduced lender risk.
Seed Funding : Early-stage investment to support initial product development and market entry.
Sole Proprietorship : A simple business structure owned and run by one individual without separate legal identity.
Shareholder : An individual or entity that owns shares in a company and has voting rights.
Subsidy : Financial aid provided by governments to support businesses or encourage certain behaviors.
Securitisation : Pooling financial assets like loans into securities sold to investors.
Scalability : A business’s capacity to grow revenue without a proportional increase in costs.
Sweat Equity : Ownership earned through effort, expertise, or time invested instead of cash.
Silent Partner : An investor who contributes capital but takes no part in day-to-day business operations.
Series A Funding : The first round of institutional venture capital raised to scale a startup post-launch.
Start-Up Loan: Capital designed to help new businesses with early-stage costs and development.
Stock Finance: Funding provided to purchase inventory or goods for resale.
Term Loan : A lump sum loan repaid over a fixed period with scheduled payments and a set interest rate.
Trade Credit : A short-term financing option where suppliers allow delayed payment for goods or services.
Turnover : Total revenue generated by a business over a given period, often referred to as “sales.”
Term Sheet : A non-binding agreement outlining key terms of an investment before final contracts are signed.
Trust Account : An account where assets are held by one party for the benefit of another under legal agreement.
Total Addressable Market (TAM) : The overall revenue opportunity available for a product or service in a specific market.
Treasury Management : The management of a company’s cash flow, investments, and financial risk.
Tokenisation : Converting real-world assets into digital tokens for trading or fundraising, often in blockchain-based finance.
Tax Relief : Reductions in tax liabilities offered as incentives for certain investments or activities.
Trailing Twelve Months (TTM) : A performance metric using financial data from the previous 12 months for analysis.
Unsecured Loan : A loan not backed by collateral, relying solely on the borrower’s creditworthiness.
Underwriting : The process of assessing risk and determining loan or investment eligibility and terms.
Use of Funds : A section in business plans or funding applications explaining how received capital will be spent.
Upside Potential : The possible gain in value or returns from an investment or business venture.
Umbrella Company : A business that employs contractors working on temporary assignments, managing tax and payroll.
Unicorn : A startup valued at over $1 billion, typically in the tech or innovation sector.
Utility Token : A type of cryptocurrency used to access a product or service on a blockchain-based platform.
Unit Economics : A business analysis that evaluates profitability based on revenue and cost per unit sold or customer.
Unfunded Commitment : The portion of capital pledged to a fund but not yet deployed by investors.
Unrealised Gain : A profit that exists on paper from an investment not yet sold or cashed out.
VAT Loan: A short-term loan to help businesses pay VAT liabilities without straining cash flow.
Venture Capital : Investment funding provided to high-growth startups in exchange for equity.
Valuation : The estimated worth of a company, typically used during investment rounds or acquisitions.
Variable Interest Rate : An interest rate that fluctuates over time based on market conditions.
Vendor Financing : A funding arrangement where the seller finances the buyer’s purchase of goods or services.
Vesting Schedule : A timeline that determines when an employee earns full ownership of company-provided equity or benefits.
Volatility : The degree of price variation in a market or investment over time; higher volatility means higher risk.
Virtual CFO (vCFO) : An outsourced finance expert providing strategic financial guidance without full-time employment.
Venture Debt : A type of loan offered to venture-backed companies that provides capital with minimal equity dilution.
Valuation Cap : A clause in convertible notes that sets a maximum valuation for conversion during future funding rounds.
Vertical Market : A market niche focusing on a specific industry, customer group, or sector.
Working Capital : The difference between current assets and liabilities, used to fund daily operations.
Write-Off : An accounting action that reduces the value of an asset or unpaid debt for tax or reporting purposes.
Warrant : A financial instrument giving the holder the right to purchase company stock at a set price before expiry.
Withholding Tax : Tax withheld at source by a payer on behalf of the recipient, often applied to income or dividends.
White Labeling : Selling a product or service under another company’s brand, commonly used in SaaS and fintech.
Wire Transfer : An electronic transfer of funds between banks or financial institutions.
Working Capital Loan : Short-term financing used to cover operational expenses like payroll, rent, or inventory.
Wealth Management : A comprehensive service offering investment advice, estate planning, tax support, and retirement planning for high-net-worth individuals.
Write-Down : A reduction in the book value of an asset due to impairment or decline in market value.
Wholesale Finance : Financing provided to a business for purchasing bulk inventory at reduced costs.
X-Efficiency : A measure of efficiency in organisations that reflects how well resources are used under competitive pressure.
XML (eXtensible Markup Language) : A data format used to structure and exchange financial data, especially in digital reporting.
XBRL (eXtensible Business Reporting Language) : A standardised language for financial reporting, used for automating business information exchange.
X-Dividend Date : The cutoff date to qualify for a declared dividend; buying after this date forfeits dividend rights.
Xenocurrency : A currency traded or used outside its domestic market; often involved in international finance.
X-Factor : A variable or asset offering potential advantage or differentiation in business performance or valuation.
X-Rate : Informal abbreviation for “exchange rate,” the value of one currency against another.
X-Day : A generic term for the expected launch, repayment, or critical date in financial or strategic planning.
X-Mark Signature : A simple mark used by a person unable to write, legally accepted in some financial agreements.
X-Capital : Venture slang for external or experimental capital deployed for speculative or unproven ventures.
Yield : The earnings generated from an investment, typically expressed as a percentage of cost or market value.
Year-End Closing : The process of finalising a company’s financial records at the end of the fiscal year.
Yield Curve : A graph showing interest rates of bonds with equal credit quality but different maturities.
YTD (Year-To-Date) : A time-based metric tracking performance or earnings from the beginning of the year to the present.
Yield Spread : The difference between yields on different bonds, often used to gauge risk and market sentiment.
Yellow Knight : A company that initially attempts a hostile takeover but switches to friendly negotiations.
Yield Management : A pricing strategy used to maximise revenue based on consumer behavior and demand forecasting.
Yield Trap : An investment that appears attractive due to high yield but involves high risk or declining fundamentals.
Yen Carry Trade : A strategy of borrowing in yen at low interest to invest in higher-yielding currencies.
Yield to Maturity (YTM): The total expected return on a bond if held until it matures.
Zero-Based Budgeting : A budgeting method where each expense must be justified for each new period, starting from zero.
Zero-Coupon Bond : A bond sold at a discount that pays no interest but is redeemed at full face value upon maturity.
Zombie Company : A business barely able to cover its debt interest payments, with little growth or innovation potential.
Zoning Laws : Regulations that determine how land and properties can be used, impacting real estate investments.
Z-Score : A statistical measure used to evaluate the probability of a company going bankrupt.
Zero-Interest Loan : A loan that does not accrue interest, typically offered under special government or promotional programs.
Zakat : An Islamic finance term referring to obligatory charitable contributions, sometimes considered in ethical investment frameworks.
Zero-Down Financing : A loan offer that requires no initial payment from the borrower, commonly seen in property or equipment finance.
Zero Liability Policy : A policy where the cardholder isn’t held responsible for unauthorised transactions under certain conditions.
Zebra Company : A mission-driven company that balances profit and purpose, in contrast to fast-scaling unicorn startups.
Conclusion
We hope that this glossary has helped you understand and gain insight into the key financial terms you’ll come across when looking for funding and handling the financial aspects of your company.
Funding Guru is dedicated to providing businesses with information, openness, and customised financial solutions. Our staff is available to help you at every stage of your financial journey if you require additional clarification or customised guidance.
