Loan Glossary

  • Assests - 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.
  • Debt - An amount owed for funds borrowed. The debt may be owed to an organization's own reserves, individuals, banks, or other institutions. Generally, the debt is secured by a note, bond, mortgage, or other instrument that states repayment and interest provisions. The note, in turn, may be secured by a lien against property or other assets.
  • Debt Service - Amount of payment due regularly to meet a debt agreement; usually a monthly, quarterly or annual obligation.
  • Debt Service Reserve - Term used to refer to cash reserves set aside by a borrower, either by internal policy or lender covenant, to repay debt in the event that cash generated by operations is insufficient.
  • Default - A failure to discharge a duty. The term is most often used to describe the occurrence of an event that cuts short the rights or remedies of one of the parties to an agreement or legal dispute, for example, the failure of the mortgagor to pay a mortgage installment, or to comply with mortgage covenants.
  • Delinquent - In a monetary context, something that has been made payable and is overdue and unpaid,
  • Due Diligence - Refers to the task of carefully confirming all critical assumptions and facts presented by a borrower. This includes verifying sources of income, accuracy of financial statements, value of assets that will serve as collateral, the tax status of the borrower and any other material facts presented by the borrower.
  • Endowment or Trust - A fund that contains assets whose use is restricted only to the income earned by these assets.
  • Equity - The value of property in an organization greater than total debt held on it. Equity investments typically take the form of an owner's share in the business, and often, a share in the return, or profits. Equity investments carry greater risk than debt, but the potential for greater return should balance the risk.
  • Equity Participation - An ownership position in an organization or venture taken through an investment. Returns on the investment are dependent on the profitability of the organization or venture.
  • Fund Balance - Net worth in a nonprofit organization; total assets minus total liabilities.
  • General Recourse - Rights to demand payment from the general assets of the debtor, without seniority in access to any specific assets.
  • Guaranteed Loan - A pledge to cover the payment of debt or to perform some obligation if the person liable fails to perform. When a third party guarantees a loan, it promises to pay in the event of a default by the borrower.
  • Interim Financing - Short-term loan to provide temporary financing until more permanent financing is available.
  • Intermediaries - Non- or for-profit institutions that have specialized lending capacities. They obtain capital in the form of equity and low interest loans from a variety of sources, including foundations and other funders, to form a "lending pool." They then serve as "wholesalers" who process large numbers of small loans or investments. This "economy of scale" often allows intermediaries to be more efficient than a foundation or funder could be if it considered each investment individually. Also, intermediaries often develop expertise in a particular field or region that foundations or funders cannot afford to develop. In the context of this study, non-financial intermediaries include community foundations and financial intermediaries include credit unions, venture capital and loan funds, banks, etc.
  • Leverage - Using long-term debt to secure funds for an organization. In the social investment world, often refers to financial participation by other private, public or individual sources.
  • Liabilities, Total Liabilities - Total value of financial claims on a firm's assets. Equals total assets minus net worth.
  • Limited Liability - Limitation of shareholders' losses to the amount invested.
  • Limited Recourse - Rights only to specifically stipulated assets to satisfy an unpaid debt.
  • Line of Credit - Agreement by a bank that a company may borrow at any time up to an established limit.
  • Linked Deposit - A deposit in an account with a financial institution to induce that institution's support for one or more projects. By accruing no interest or low interest on its deposit, a foundation essentially subsidizes the interest rate of the project borrowers.
  • Loan Agreement - A written contract between a lender and a borrower that sets out the rights and obligations of each party regarding a specified loan.
  • Loss Reserves - That portion of a fund's earnings or permanent capital designated by the board of directors as a reserve against possible loan losses and, as such, unavailable for lending purposes. Generally accepted accounting principles governing for-profit and regulated financial institutions require that loan loss expense be deducted as an annual expense on an accrual basis and that the loan loss reserve be shown as a contra asset reducing loan assets. To date, no accounting convention has been established to govern loan loss reserve accounting for unregulated nonprofit institutions. The technical treatment is to establish the reserve through periodic charges against earnings, and actual losses, when and if incurred, and are charged against the reserve. For balance sheet purposes a loan loss reserve (should) be shown as a deduction from the loan portfolio to suggest that its true economic value should be reduced by the estimated loss exposure.
  • Market Rate - The rate of interest a company must pay to borrow funds currently. Program-related investments generally are offered at below market rates or at no interest rate.
  • Negative Covenants - Statements of actions or events of the borrower must prevent from occurring or existing, for example, additional borrowing without the lender's consent.
  • Net Working Capital - Current assets minus current liabilities.
  • Net Worth (Fund Balance in nonprofit. organizations) - Total assets minus total liabilities. Aggregate net value of the organization.
  • Opportunity Cost - The potential benefit that is foregone from not following the best (financially optimal) alternative course of action.
  • Portfolio - A combination of assets held for its investment benefits, including financial and non-financial returns. The asset mix is usually varied in kind and size to maintain an acceptable level of risk and return.
  • Principal - In commercial law, the principal is the amount that is received, in the case of a loan, or the amount from which flows the interest.
  • Program-Related Enterprise - A business or enterprise designed to promote the social purpose goals of an organization as well as generate revenue. Among nonprofits, products and services are usually, but not exclusively, identified with the purpose of the organization. Activities can range from fee-for-service charges to full-scale commercial ventures.
  • Program-Related Investment - Broad, functional definition: A method of providing support to an organization, consistent with program goals involving the potential return of capital within an established time frame. In the context of this study, program-related investments include loans, loan guarantees, equity investments, asset purchases or the conversion of asset(s) to charitable use, linked deposits, and, in some cases, recoverable grants.
  • Promissory Note - Promise to pay. Written contract between a borrower and a lender that is signed by the borrower and provides evidence of the borrower's indebtedness to the lender.
  • Receivables - Accounts receivable; an amount that is owed the business, usually by one of its customers as a result of the ordinary extension of credit,
  • Recourse - Refers to the right, in an agreement, to demand payment from the person who is taking on an obligation. A full recourse loan refers to the right of the lender to take any assets of the borrower if repayment is not made. A limited recourse loan only allows the lender to take assets named in the loan agreement. A non-recourse loan limits the lender's rights to the particular asset being financed -- an approach that is common in home mortgages and other real estate loans.
  • Recoverable Grants - Funds provided by a philanthropist to fulfill a role similar to equity. A recoverable grant may include an agreement to treat the investment as a grant if the enterprise is not successful, but to repay the investor if the enterprise meets with success.
  • Restructure - A revision of a financial agreement that alters the conditions or covenants of the original agreement. For example, parties may agree to restructure a loan agreement, easing the payment schedule, when a borrower is delinquent or otherwise faces default on a loan.
  • Roll Over - Prior to or at the time of the maturity of an investment or loan, the interested parties agree to continue to carry over the investment or loan for another, successive period of time.
  • Security - A pledge made to secure the performance of a contract or the fulfillment of an obligation. Examples of securities include real estate, equipment stocks or a co-signer. Mortgages are a form of security with strong legal standing, because they are publicly registered following a formal legal procedure. A mortgage gives the lender holding a mortgage security the right to reclaim the asset being financed, if repayment is not made.
  • Senior Debt - Debt that must be repaid before subordinated debt receives any payment in the event of default.
  • Subordinated Debt (Junior Debt) - Debt over which senior debt takes priority. In the event of bankruptcy, subordinated debt-holders receive payment only after senior debt is paid in full. A subordination of security interest in property allows another creditor to have the rights to the proceeds of the sale of that property before the claim of the subordinated creditor.
  • Term - Refers to the maturity or length of time until final repayment on a loan, bond, sale or other contractual obligation.
  • User - A non- or for-profit entity that receives a program-related investment directly from a funder for use in its programs or ventures.
  • Warranties - Statement attesting that certain statements are true. For instance, the borrower may warrant that it is a corporation, that it is entering into the agreement legally and that financial statements supplied to the bank are true.
  • Working Capital - Technically, means current assets and current liabilities. The term is commonly used a synonymous with net working capital. The term often also is used to refer to all short-term funding needs for operations (excluding debt service and fixed assets). A company's investment in current assets that are used to maintain normal business operations. Net working capital, which is the excess of current assets over current liabilities is also interchangeable with working capital. Both reflect the resources in circulation to meet operating needs and obligations as they come due.
  • Write off - When an investment, such as a loan, becomes seriously delinquent or in default and is determined to be uncollectible, the lender may choose to charge the outstanding investment amount as an expense or a loss.

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WhyNotLoans Articles

  • Easy Personal Loans

    Today's financial marketplace is awash with personal loan providers and the volume of competition can be overwhelming.Few years back it was not so easy to plan all that especially if you did not have the necessary funds. Now it is!..A car, home, holiday to favourite destination...- who doesn't want all that!.Fast personal loans on the way. Now and then we get into situations when fast personal loans can prove to be of great help. Whether it's the creditors who are knocking at your door or a purchase that you definitely need to make tomorrow, fast personal loans are an easy way of handling sudden cash requirements. A Fast Personal Loan is usually made for the purpose of debt consolidation, vacation or the purchase of durable goods. This is the fastest way to get the money that you need. Within just a few days you can write an instant fast loan for cash or use the new checks to help you with financial needs.

  • Fast Personal Loans

    You are in need of finance so that various expenses towards different works could be met. But there is a problem. You require funds immediately and you have limited own resources. Your biggest hurdle is that you are labeled as bad credit in the loan market, making fast loan availing all the more difficult. The solution is bad credit fast personal loans that are especially designed for quick approval of finance for bad credit people. The loan can be put to different usages like making home improvements, meeting medical or educational expenses or even paying off previous debts.

  • Bad Credit Loan

    If you are suffering from bad credit in any form, you probably want to do everything you can to clean things up so you can enjoy the world of good credit again. After all, in the media and from talks with the majority of mortgage brokers and big lenders, chances are you've been told that bad credit won't get you anywhere - ever. The great news is that's rubbish! Working in the bad credit mortgage industry, I personally know that people with bad credit are securing mortgages - good ones with reasonable interest rates - every day. You can too, and when you do, it's important to decide immediately that this bad credit loan will be your last - ever!

  • Bad Credit Auto Financing

    Are you one of the many people who have credit problems? Bad credit is more common than you think! The good news is, more and more lenders are now targeting consumers with bad credit! Even if you have bad credit, you can still qualify for an auto loan...and it's become easier and less humiliating now due to the wonders of the internet! You can apply online, and not have to put up with the unneeded stress of trying to get financed through the dealership!

  • Bad Credit Home Financing

    In the early nineties subprime mortgages accounted for about five percent of all mortgages. Today the subprime mortgage loan sector comprises more than twenty percent of the mortgage market. With this explosion of subprime mortgage lenders and brokers, it is important to know what to look for when choosing your lender. Not only do you want to be sure that you are getting the best deal possible for your subprime mortgage, you also want to know how to avoid falling prey to a predatory lender.

  • A Guide To Personal Loans

    Personal loans can be lifesavers, providing you with much-needed financial assistance at the most opportune times. Not everyone really understands personal loans, however, and that can sometimes lead to problems in finding the best deals for personal loans that an individual is eligible for. With a little bit of thought given to personal loans before applying, it's possible to save both time and money in the long run... it's mostly a matter of shopping around for the best loan and taking advantage of the lending options that are available.

  • Finding Loans With Bad Credit

    Even though it may seem like it at times, having bad credit isn't the end of the world. While you might think that you'll never be able to get a loan that you desperately need because of your credit score, with a little bit of persistence and some careful preparation you'll find that there are a variety of different loan options available to you. The keys to finding a loan with bad credit are keeping your options open, having the right collateral, and shopping around to find the best interest rate that you can get.

  • Debt Consolidation With Bad Credit

    If you have bad credit, you might wonder how you're ever going to get the money that you need to get out of debt and restore your credit rating. As odd as it may seem, the answer to your problems might be another loan; taking out a debt consolidation loan can help you to repay part or all of your outstanding debts and leave you with only one payment to make each month instead of several. Getting a debt consolidation loan while you have bad credit might seem impossible, but there are several ways that you can improve your chances of finding and receiving the loan that you need despite your less-than-perfect credit rating.

  • Refinance With Bad Credit

    If you have bad credit and believe you are out of luck when it comes to refinancing or purchasing a new home, you may want to reconsider your options. Just because you have bad credit, it does not mean you will be unable to get a loan, nor does it mean that you are at the mercy of the mortgage companies. You are not. The mortgage industry is a very diverse one with literally thousands of lenders across the country that just might offer a program that fits your needs.

  • Finding The Right Bad Credit Lenders

    There are times when people will find themselves in a difficult financial situation. It may be because their business has not worked out and is on the verge of becoming bankrupt or it could be for personal reasons (namely their divorce settlement is not what it should have been). But at any time the need for financial support is important, but when faced with situations such as shown previously a loan to help them recover is hard to find. There are many reasons why getting a loan could be difficult, it may be they have a poor credit rating or they have no equity to act as security on a loan that lenders will normally provide. However, now there are money lenders around called bad credit lenders who can assist these people when their state of financial affairs is so dire.

  • Bad Credit Refinance 101

    If you are like every other home owner or general consumer out there, you need to pay for your expenses somehow. If you have bad credit, you might be limited in your options as to what you can do (or so you think...keep reading!). This can be especially annoying to homeowners who want to refinance their mortgages to take advantage of low interest rates but have had a few debt defaults in recent years. The story is always the same: you see these low 5% interest rates advertised on TV and you know that you deserve to refinance your home loan with this low interest rate. However, once you call, you find out that in fact you can refinance your mortgage, but it will cost you a lot more than you think. "What?" you think to yourself... "Why does it cost more for me to refinance my mortgage than I thought it would?" The reason is simple: bad credit. Refinancing with bad credit can be difficult. You might have filed for bankruptcy or racked up a whole bunch of debt which you just couldn't pay off. Debt defaults take a long time to get off your credit report (if they ever come off!) and they can affect every lender to whom you owe money.

  • Unsecured Loans With No Credit

    Lenders label individuals with no credit history as 'high risk'. Being considered 'high risk' can be the 'kiss of death' when it comes to getting approved for unsecured loans. Why? Because unsecured personal loans require no collateral. So, the lender loaning you your money trusts you that you will make timely payments. This is not a personal issue of trust, it is a credit issue. Lenders do not want to lend unsecured loans to people with no credit or bad credit, period.

  • Deciding Between Secured And Unsecured Loans

    Finding the right loan for you and your financial needs is important... after all, you don't want to pay any more for your loan than you absolutely have to. When shopping for a loan, however, you might find yourself facing a decision between applying for secured and unsecured loans. If you're not entirely sure what the difference is or which type of loan is right for you, then the information provided below should shed a little bit of light on these two different types of loans and when the best time is to use each.

  • Getting Good Value Personal Loans

    Over recent years, personal loans have become a popular solution for many consumers looking to raise finance for a variety of purposes. You can get personal loans for all sorts of things, from debt consolidation to holidays, cars and other purchases. It is far easier these days to get a great deal on finance, with cheap personal loans available from a variety of competitive lenders.

  • Bad Credit Loans - Much Needed Money In Most Interesting Times

    For people who do not know much about bad credit, it will often be incomprehensible as to why a financial product has been devoted solely to cater to the class. Nonetheless, the proportions that bad credit people constitute of the population, justifies the creation of a separate loan category. It is however, contestable if bad credit loans have done enough justice to its customers.

  • Get Your Business Secured With Bad Credit Loans

    Getting fund through business might be easy but what about funding for a business? Running a business requires constant financing from you at its every stage. Even a slightest financial delay or interruption might hamper the growth of your business considerably. So it becomes quite challenging to carry on business when your financial situations are not favourable and you start searching for other sources. Such a source of economic help for your business during your financial hardships is bad credit secured business loans. They are the best method to avoid any kind of financial crisis with your enterprise.

  • Poor Credit Personal Loans

    You could need a personal loan for any reason - to pay medical or college bills, buy or repair your home, buy a car or household gadgets, or finance a vacation or a small business. It is easiest getting a personal loan when you have steady employment and a good credit record - you can then easily get a loan from your bank. It is not so easy getting a personal loan when you are self-employed, have little or no property to your name, or have just graduated from college. You are considered a bad credit risk. It is most difficult getting a personal loan when you have already been through a bankruptcy, foreclosure, or repossession case - you are considered a very poor credit risk indeed.

  • Bad Credit Car Loans: Making Bad Credit Scorers, Car Owners

    Have you ever thought that you can avail a car loan despite having bad credit score? Most of the answers will be negative. But, with bad credit car loans a bad credit scorer can easily become a car owner. Yes, if you want to apply for a car loan, but hesitate because of your bad credit score, then apply for bad credit car loans without any hesitation.

  • Personal Loans : Best Answer To Financial Needs When Facing Multiple Choices

    A car, home, holiday to favourite destination... - who doesn't want all that! Few years back it was not so easy to plan all that especially if you did not have the necessary funds. Now it is! Personal loans are making possible for everyone to borrow money for any kind of requirement. Personal loans literally mould themselves to reconcile with the financial needs of any borrower. "Personal loans" is the generic term for loans. Personal loans are in fact a lump sum which is borrowed from a bank or building society or any other lender. Good personal loans are a rare breed. Like all better things in life it comes with tact, patience and consistent effort.

  • Loans For Every Occasion: Home Loans, Payday Loans, Student Loans And More

    At some point in life, it is almost guaranteed that you will be applying for a loan of some sort. Paying cash for products and services is not only becoming obsolete, it's terribly inconvenient. Today, credit is a way of life, and as more and more people begin to shop online, plastic is the currency accepted everywhere. The most basic of loans is of course, the credit card. Companies that issue credit cards make money every month that you carry a balance, and they are betting on the fact that you won't pay off the balance every month.