Defining Financial Jargon

April is Financial Literacy Month! As an entrepreneur, have you ever been in a conversation and people start throwing around terms like “Venture Capital” or “Angel Investors,” and you had no idea what they were talking about? You’re not alone! Financial terms and investment jargon can be confusing and alienating for lots of people and business owners. To celebrate Financial Literacy Month, we’ve put together a glossary of financial terms so that you can confidently walk into any conversation about money and not feel overwhelmed. 

Angel Investors: Individuals who provide money to startups or small businesses in exchange for ownership (equity) in the company.

Capital Stacking: Combining different sources of funding, like loans, grants, and investments, to support a business.

Cash Flow Projections: Estimates of how much money will come in and go out of a business over a specific period and helps to plan for the future.  

Check out this video for a tutorial on cash flow projections.

Convertible Note: A loan that can convert into ownership (equity) in the company, usually when a certain event, like a future funding round, occurs.

Dilute: To reduce the ownership percentage in a company, often happens when new investors come in.

Equity: Ownership in a company: owning equity means you have a share in the company’s value and potential profits.

Highest Position: The top priority or the front of the line for repayment if a company faces financial difficulties.

Highest Potential Returns: The possibility of making the most profit or getting the highest financial return.

Interest Rates: The cost of borrowing money that is expressed as a percentage of the loan amount.

Mezzanine Financing: A type of financing that combines debt and equity, often used for expansion or major projects.

Private Equity: Investments made in private companies by individuals or firms in exchange for ownership.

Private Funding Sources: Money coming from non-public (individuals, companies) sources to support a venture or project. Examples of entities would be angel investors or venture capital.

Public Funding Sources: Money coming from the government or publicly available sources to support a venture or project. Examples would be grants or crowdfunding.

Risk Profile: The level of uncertainty or potential for loss associated with an investment or business.

Secured: Backed by collateral, if the borrower can't repay, the lender can take something valuable as compensation.

Senior Debt: The first level of debt that gets paid back in case of financial trouble; it has a higher priority.

Traditional Lenders: Established institutions like banks that provide standard loans with set terms and conditions.

Venture Capital: Funding from companies or individuals that invest in early-stage businesses in exchange for ownership.

Interested in learning more about funding options for your business, or obtaining a small business loan with SCCF? Fill out our loan interest form, and a member of our team will reach out to you to discuss more! 

Loan Interest Form