Loan Terms Glossary A - C

Assets
Anything of value. Any interest in real or personal property which can be appropriated for the payment of debt.

Bad Debt
A debt that is not collectible and is therefore worthless to the creditor.

Balance Sheet
Financial statement presenting measures of the assets, liabilities and owner's equity or net worth of business firm or nonprofit organization as of a specific moment in time.

Bridge Loan
Short-term loan to provide temporary financing until more permanent financing is available.

Business Plan
A document that describes an organization's current status and plans for several years into the future. It generally projects future opportunities for the organization and maps the financial, operations, marketing and organizational strategies that will enable the organization to achieve its goals.

Capital
Broadly, all the money and other property of a corporation or other enterprise used in transacting its business.

Capitalization
Long-term debt, preferred stock and net worth. The loan capital of a community development loan fund; includes that which has been borrowed from and is repayable to third parties as well as that which is earned or owned by the loan fund (i.e. "permanent capital").

Capital Markets
Those financial markets, including institutions and individuals, that exchange securities, especially long-term debt instruments.

Cash Flow Financing
Short-term loan providing additional cash to cover cash shortfalls in anticipation of revenue, such as the payment(s) of receivables.

Collateral
Assets pledged to secure the repayment of a loan.

Covenant
An agreement or promise to do or not to do a particular thing; to enter into a formal agreement; a promise incidental to a deed or contract. The following are functional objectives guiding most covenants: full disclosure of information, preservation of net worth, maintenance of asset quality, maintenance of adequate cash flow, control of growth, control of management, assurance of legal existence and concept of going concern, provision for lender profit or program goals.

Current Asset
Assets that will normally be turned into cash within a year.

Current Liability
Liability that will normally be repaid within a year.

Current Ratio
Current assets divided by current liabilities -- a measure of liquidity. Generally, the higher the ratio, the greater the "cushion" between current obligations and a firm's ability to meet them.