Glossary

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Bad Debts

Money your business is owed by another person or company that is considered "uncollectable," creating a bad debt. A debt becomes uncollectable when there is no longer any chance the amount owed will be paid. You must show tax agents and lenders that you have taken reasonable steps to collect the money, but were unable to do so. An example of a bad debt is if you loan money to a supplier or distributor for a business purpose, and they are unable to pay you back.

Balance Sheet

Your balance sheet is a financial document where you list your company's assets, liabilities, and net worth. The balance sheet will serve as a snapshot of your business' financial health. Analysis of a balance sheet over time can provide you with important information about your business including management of inventory, revenue collection, and debt repayment.

Bankruptcy

In order to claim bankruptcy for your business, you must file with a federal district court and demonstrate that you cannot meet your debt obligations and require either reorganization of your business debts or liquidation of the business assets.

Blanket Lien

You can secure a loan for your small business by accepting a blanket lien from a lender. A blanket lien gives lenders the right to seize almost all your business assets if you default on your small business loan. In the event of default, lenders can only take what is needed to settle your outstanding debt.

Break-Even Point

The break-even point in any business is the time at which your revenue will equal total expenses -- the point at which there is neither a profit nor loss. A breakeven analysis is used to determine when your business will be able to cover all your expenses. To calculate your breakeven point, forecast your expected fixed costs (usually include overhead expenses like rent or payroll) and variable costs (expenses that can shift like inventory or shipping), and compare to your expected total revenue over time.

Business Certificate/License

Generally, every business needs some form of license or permit to operate legally. It's important to note that licensing and permit requirements vary depending on the type of business you have, where the business is located, and what government rules apply.

Business Lease

A business lease is a document that outlines the rental agreement between your business and the property you are renting (unless you own your own property). Before signing a business lease, you should carefully review it, and if you can, have it reviewed by an attorney or legal expert. Residential and business leases are very different, and generally, businesses are not protected by leases the way residents are. Your rental agreement and associated costs may be part of the package you submit with your loan application. Learn more about what you might need to collect for a loan application.

Business Plan

Your business plan is the comprehensive document that outlines everything about your business. The business plan is a living document, meaning that it should be reviewed and updated as your business output and needs change. Usually, the business plan projects your plans, projected debts and revenues, and growth for 3-5 years. The business plan will be required for most loan applications. Learn more about what you might need to collect for a loan application.

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