Glossary

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Accounting

Accounting is the recording of financial transactions . Accounting for your business includes storing, sorting, retrieving, summarizing, and presenting the information in various reports and analyses. Potential lenders may ask for a summary of your business accounting as part of your loan application. Learn more about what you might need to collect for a loan application.

Accounts Payable

Accounts payable (AP) is an accounting entry detailing your debts to creditors. Accounts payable are sometimes be referred to as "payables," and usually refer to goods or services received. Your list of payables is an important part of your balance sheet.

Accounts Receivable

Accounts receivable (AR) refers to money that customers and other institutions owe your business. Usually receivables are organized by notes, statements, invoices or other written evidence. You should include your receivables on your balance sheet to maintain a record of how money is flowing in and out of your business.

Affiliates

An affiliate is a type of relationship between businesses in which one of the businesses owns some minority part of the other.

Amortization

Debt amortization is the gradual reduction of debt, over a specific period of time, via a fixed repayment schedule. The payment should be sufficient to pay current interest and to eliminate the debt amount at maturity. Debt amortization plans can be a useful tool to help manage your loans and project your payment schedule.

Annual Percentage Rate (APR)

The annual percentage rate (or APR) is the amount of interest on your total loan amount. You pay the full APR annually (averaged out over the term of the loan). A lower APR translates to lower monthly payments. When calculating your monthly payments on a loan, be sure to include the interest amount.

Assets

Assets in a small business include anything that can be used to pay debts. "Liquid" or "tangible" assets can be quickly sold and converted to cash, or used as collateral in a loan application. Examples of tangible assets include buildings, vehicles, or office equipment. On a balance sheet, your assets should include anything owned or due to the business including cash, Accounts Receivable, inventory, and other items.

Assumptions

Financial assumptions and projections are a part of the business plan. Lenders and investors will review the research and calculations you make about projected profitability and your customer base. Be prepared to show how you made these calculations and assumptions.

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