Definitions - Chapter 11

Question 1

Credit

Answer 1

Money loaned or the ability of an individual or company to borrow money

Question 2

Collateral

Answer 2

Something of value – such as property or assets – that is pledged as a guarantee to support the repayment of a loan or debt

Question 3

Unsecured Credit

Answer 3

Credit extended to a borrower on the promise to repay the with no collateral required

Question 4

Bootstrapping

Answer 4

Relying entirely on one’s efforts and resources

Question 5

Angels

Answer 5

Wealthy individuals from the informal venture capital market who are willing to risk their money in someone else’s business

Question 6

Venture Capital (VC)

Answer 6

Money provided to seed, early-stage, emerging and emerging growth companies.

Question 7

Operating Loan (Line of Credit)

Answer 7

Money lent to help finance short-ter business needs, such as inventory and accounts receivables

Question 8

Prime Rate

Answer 8

The lowest rate of interest charged by banks on commercial loans to their most preferred customers

Question 9

Term Loan

Answer 9

Loan used for medium- to long -term financing of fixed assets, such as equipment, furniture, expansion, or renovation

Question 10

Fixed Rate

Answer 10

Interest rate that remains the same over the period of a loan

Question 11

Floating Rate

Answer 11

Interest rate that changes with changes in the prime rate

Question 12

Debt Financing

Answer 12

An obligation of a business to repay a lender the full amount of a debt (loan) in addition to interest charges