Essentials of Entrepreneurship and Small Business Management – CH 13

layered financing
entrepreneurs must place together capital from multiple sources
form of wealth employed to produce more wealth
equity capital
represents the personal investment of the owner (or owners) in a business and is sometimes called risk capital because these investors assume the primary risk of losing their funds of the business fails
debt capital
the financing an entrepreneur borrows and must repay with interest
tapping personal savings and using creative, low-cost methods
accredited investors
these people must have a sustained net work of at east $1 million or annual income of $200,000
a few creative entrepreneurs have used a loophole to raise money from investors who do not meet the requirements of accredit investors
accelerator program
offers new entrepreneurs a small amount of seed capital and a wealth of additional support
private investors (angels)
are wealthy individuals, often entrepreneurs themselves, who are accredited investors and choose to invest their own money in business start-ups in exchange for equity stakes in the companies
venture capital companies
private, for-profit organizations that assemble pools of capital and then use them to purchase equity positions in young businesses they believe have high-growth and high-profit potential, producing annual returns of 300 to 500 percent within five to seven years
initial public offering (IPO)
a company raises capital by selling shares of its stock to the general public for the first time
managing underwriter (investment banker)
the managing underwriter serves two primary roles; helping to prepare the registration statement for the issue and promoting the company’s stock to potential investors
letter of intent
outlines the details of the deal
registration statement
this document describes both the company and the stock offering and discloses information about the risks of investing
road show
a gathering of potential syndicate members sponsored by the managing underwriter
term loan
typically unsecured, banks grant these loans to businesses whose past operating history suggests a high probability of repayment
7(a) loan guaranty program
is the SBA’s flagship loan program
CAPline Program
offers a short-term capital to growing companies seeking to finance seasonal buildups in inventory or accounts receivable under five separate programs, each with maturities up to five years: seasonal line of credit
export express program
offers quick turnaround times on applications for guarantees of 75 to 90 percent on loans up to $500,000 to help small companies develop or expand their export initiatives
export working capital (EWC) program
designed to provide working capital to small exporters
disaster loans
are made to small businesses devastated by some kind of financial or physical losses from natural disasters
advance rate
the percentage of an asset’s value that a lender will lend
margin loans
carry lower rates because the collateral supporting them – stocks and bonds in the customer’s portfolio
margin (maintenance) call
broker can call the loan and require the borrower to provide more cash and securities as collateral
credit unions
nonprofit financial cooperatives that promote saving and provide loans to their members, are best known for making consumer and car loans
small business investment companies (SBICs)
are privately owned financial institutions that are licensed and regulated by the SBA
capital access programs (CAPs)
designed to encourage lending institutions to make loans to businesses that do not qualify for traditional financing because of their higher risk
revolving loan funds
combine private and public funds to make loans to small businesses, often a favorable interest rates, for the purpose of starting or expanding businesses that create jobs and contribute to economic development
community financial institutions (CDFIs)
designate at least some of their loan portfolios to supporting entrepreneurs and small businesses
rollovers as business startups (ROBs)
a means of using retirement savings to fund businesses
merchant cash advance
used by small businesses to help finance working capital needs
peer-to-peer loans
web-based vetting platforms that create an online community of lenders who provide funding to creditworthy small businesses
loan brokers
specialize in helping small businesses find loans by tapping into a wide network of lenders that include SBA lenders

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