Business Loans Glossary: Part 4 – Property Development Finance to Yield
Business Loans Glossary: Part 4 – Property Development Finance to Yield
Mark Blayney
The last in the series of this guide to business loans and finance raising covers ‘property development finance’ through to ‘yield’.
Property development finance – Finance designed to fund property development and so designed to help finance both site purchase and building costs.
Prospectus – A package of information prepared for provision to potentially interested investors in a flotation.
Prudence – The accounting concept of recognising losses as soon as they can be identified, but profits only once they have been earned.
Public limited company (PLC) – A company which meets certain statutory requirements such as the level of its issued share capital and which may therefore be entitled to sell shares to the public. Not all PLCs are however listed on a stock exchange.
Quick ratio – See the definition of acid ratio in part 1 of this series.
Ratchet – Arrangement whereby the management’s stake in the business is increased as the business hits targets.
Receivable – The US equivalent to the UK term debtor.
Recourse – Arrangement where a factor or invoice discounter can recover any advance made to you in respect of any debt that is subsequently not recovered. A non-recourse arrangement provides you with protection against this.
Regulated loan – A loan where a first charge is given on a domestic property or on a commercial property where over 40% of the area is used as your residence.
Reserves (1) – A business’s retained earnings.
Reserves (2) – Where a factor or invoice discounter reduces your availability to cover any potential exposure (for example to supplier contras).
Rolling bridges – The use of a series of bridging loans, for example to fund a phased property development project.
Sale and leaseback – A way of raising cash from an asset which involves selling it to a third party and then renting it back.
Second round funding – Further equity investment into a business with an existing external investor (for example by a venture capitalist to develop a business that has had start up or seed money from a business angel).
Secondary buy out – Sale of a VC’s interest in a company to a different VC.
Section 320 – Provision in the Companies Act that prevents a director purchasing substantial assets (broadly anything worth more than £100,000 or 10% of the net assets of the company) without first obtaining the consent of the shareholders.
Security (1) – A source through which a debt can be repaid if the borrower does not make repayments in the normal way, such as a charge over property or other assets.
Security (2) – A document which acknowledges that the holder has certain rights (such as repayment of a debt from the issuer).
In the US can be extended to cover a share certificate.
Self certification – The process whereby a borrower confirms that they are able to make repayments on a loan rather than proving it by providing accounts.
Share capital – The capital contributed to a company by its shareholders.
Shareholders funds – The total book value of a company (the net assets on its balance sheet) which is owned by shareholders.
Small Firms Loan Guarantee – A scheme where the Government provides a partial guarantee to lenders for loans made to small businesses.
Sole trader – An individual in business in their own name.
Stapled finance – A package of potential borrowings pre-arranged for the buyer by the seller of a business.
Statement of source and application of funds (SSAF) – Statement showing how profits generated by the business combine with investment in or realisation of assets, together with credit received or repaid, result in a movement in the businesses cash.
Stock (1) – A company’s trading stock, which will include raw materials, work in progress, as well as its finished goods stock.
Stock (2) – A company’s shares.
Stock days – A measure of the time taken in converting goods purchased into sales.
Stock exchange – A market in which shares and other securities can be traded.
Structured loans – Loans from an asset based lender across more than one type of asset (eg factoring and a property loan).
Sub prime – Borrowers with significant levels of adverse making them unattractive to mainstream lenders.
Swing – Movement in a bank current account.
Syndication – Situation where a number of funders combine to jointly fund a project.
Term loan – A loan repayable by an agreed level of installments over a period of years.
Top up funding – Additional mezzanine or equity finance to cover the difference between total costs of a property development project and the sums available under normal property development finance.
Trade finance – Funding for trading transactions such as importing goods for resale.
Transaction at an undervalue – Selling an asset at less than its fair value. In the event of an insolvency, a liquidator will review significant transactions preceding the insolvency and can act to set aside transactions at undervalue.
VC – Venture Capital or Venture Capitalist.
Veil of incorporation – The protection offered to shareholders by a company’s limited liability.
Vendor finance – See deferred consideration.
Venture capitalists (VC) – A firm set up to hold investors’ money and to invest it in high growth opportunities. Generally seek a return equivalent to over 30% per annum and will want to hold an investment for three to five years before exiting. Generally tend not to be interested in deals below say, £0.5m investment.
Whitewash report or agreement – Accountant’s report required where cash is to be raised for a purchase against the value of a target company’s assets.
Work in progress – Goods which are in the process of manufacture but which are not yet finished, or work on a contract which is not yet complete.
Working capital – A business’s current assets less its current liabilities.
Working capital cycle – The concept that a business’s working capital turns over as it goes through its cycle of trade; suppliers providing goods which become firstly stock and then once sold, debtors; with the cash received from debtors then being used to pay suppliers.
Yield – The amount of return received (E for earnings) for the price (P) paid. Usually shown as a percentage.
We hope this short series has helped to de-mystify some of the jargon used in finance.
Mark Blayney is a business finance raiser and author. For more information on business loans or any aspect of finance for owner managed businesses contact him at: http://www.business-loans-info.co.uk
This time Max Keiser and co-host, Stacy Herbert, look at the scandals of Tony “No Blood for Oil” Blair lying about selling the UK gold supply on “technical advice of the Bank of England;” a millionaire tramp in Sweden and a casino that refuses to pay in America; and, finally, the Irish ‘Bad Bank’ and the ‘Celtic Chernobyl.’ Max also talks to William ‘BJ’ Lawson, who is running for Congress in North Carolina’s 4th District, about Ron Paul Republicans, the Federal Reserve setting fiscal policy and defining President Obama.
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