- Accounts Receivable: Claim against a debtor for an uncollected amount, generally from a completed transaction of sales or services rendered.
- Amortization: A non-cash operating expense that reduces the value of intangible assets (such as patents, trademarks or goodwill) in a systematic manner. Amortization is recorded in the financial statements of an entity as a reduction in the carrying value of the intangible asset in the balance sheet and as an expense in the income statement.
- Commercial Mortgage: Legal instrument evidencing a security interest in assets, usually real estate.
- Depreciation: A non-cash operating expense that reduces the value of a tangible asset as a result of wear and tear, age, or obsolescence. Depreciation is recorded in the financial statements of an entity as a reduction in the carrying value of the asset in the balance sheet and as an expense in the income statement.
- Estimate Property Value: Approximate amount someone is willing to pay for a property and the amount the seller is willing to accept in a given market at a given time. For context: this would be the price of the property you have agreed to pay the seller if you are requesting a Commercial Mortgage.
- EBITDA: Earnings before interest, taxes, depreciation, and amortization (EBITDA). This metric reflect a company’s progress absent financing decisions, taxes, and various non- cash expenses.
- Fees: Amount charged by a bank to provide their services. Could be an annual or one time charge at the loan closing.
- Financial Covenants: Promises or agreements by the borrower to fulfill terms set by the bank. For example: Total Leverage Covenant of 3.50x would mean, you need to maintain your Total Debt / EBITDA below 3.50x.
- Guarantors: A party who will guarantee repayment or performance of a covenant.
- Interest Expense: Payment for the use or forbearance of money.
- Interest Rate: The cost of money expressed as an annual percentage
- Inventory: Tangible property held for sale, or materials used in a
production process to make a product. - LIBOR/SOFR: London Interbank offered rate- serves as a globally accepted key benchmark interest rate that indicates how much it costs to the banks to borrow from each other.
- Liens: Creditor’s claim against property. For example, a mortgage is a lien against a house.
- Line of Credit or "LOC": A line of credit is more like cash on demand for a set amount. You can draw funds up to the credit limit set when your company needs it, and you only pay interest on the funds you withdraw.
- NAICS Code: North American Industry Classification System, used throughout North America to classify businesses with a six-digit number based on the primary type of work the business performs.
- Net Income: Revenues – Expenses = Net Income/Loss
- Net Worth: The total wealth of an individual/ business or household considering assets and liabilities (found on the balance sheet). Total Assets- Total Liabilities= Total Net Worth.
- One-time or Non-cash Expenses: A write-down or accounting charge that does not involve a cash payment. Depreciation, amortization, depletion, stock-based compensation, and asset impairments are common non-cash charges that reduce earnings but not cash flows.
- Personal Guarantee: The assumption of responsibility for payment of a debt or performance of some obligation if the liable party fails to perform to expectations. For context: Banks are looking for a personal guarantee for an extra level of protection if the borrower is unable to repay their loan.
- Pricing: Interest charged on loan.
- Prime: Rate of INTEREST charged by major U.S. banks on loans made to their preferred customers.
- Revenue: Sales or royalty proceeds. Quantity times price sold.
- Tax Expense: The total amount of taxes owed by an individual, corporation, or other entity to a taxing authority. Income tax expense is arrived at by multiplying taxable income by the effective tax rate.
- Term Loan: Loan for a specified time period.
- Total Assets: An economic resource that is expected to be of benefit in the future. Probable future economic benefits obtained as a result of past transactions or events. Anything of value to which the firm has a legal claim. Any owned tangible or intangible object having economic value useful to the owner.
- Total Liabilities: Debts or obligations owed by one entity (debtor) to another entity (creditor) payable in money, goods or services.
- Total Net Worth: Similar to Equity. The excess of assets over liabilities.
- Working Capital: The deployment of current assets and current liabilities so as to maximize short-term liquidity.
