Business Finance Terms

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Overdraft

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A bank allows a business to overdraw its bank account by an agreed upon amount.

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Commercial Bills

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A short-term loan for a large amount of money (usually over $100,000) for a period between 30-180 days.

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Factoring

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The selling of accounts receivable for a discounted price.

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Mortgage

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A long-term loan secured against the property of a business.

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Debentures

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An investment issued by a company where investors lend them money for a fixed period and at a fixed rate, secured against the company assets.

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Unsecured Notes

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A loan provided by investors for a set period of time. The loan is not secured against the business assets.

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Leasing

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The payment of money for the use of equipment that is owned by another party.

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Retained Profits

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Profits that are reinvested back into the business rather than distributed as dividends to shareholders.

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Self-funding

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Also known as bootstrapping, this involves the prospective business owner using personal funds to start a business.

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Family and Friends

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People close to you provide the funds required to start the business often in return for a share of the profits. This is a quick and easy way to finance a business, but can cause issues with personal relationships if money becomes tight.