Equity investment is the provision of capital to a firm in return for partial ownership of that firm. Investments are typically made by venture capital firms or angel investors. Equity investors are not looking for repayment in the way that a loan company expects. Instead, they are looking for an exit strategy whereby they can recoup their investment with a good profit. (See Exit strategy)
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Entrepreneur
One who assumes the financial risk of the initiation, operation, and management of a given business or undertaking.
Early-Stage Business
An early stage business is similar to a start-up. However, when the term “early-stage” is used, it typically means that the business is in its early operational stage, but has no or little revenue.
Convertible Debt
A security which can be exchanged for a specified amount of another, related security, at the option of the issuer and/or the holder. In most cases, a convertible debt security is converted to equity or stock.
Collateral
An asset pledged as security to ensure payment or performance of an obligation. In bank lending, it is generally something of value owned by the borrower. If the borrower defaults, the asset pledged may be taken and sold by the lender to fulfill completion of the original loan contract.
Cloud Computing
A new generation of computing that utilizes distant servers for data storage and management, allowing the device to use smaller and more efficient chips that consume less energy than standard computers.
Simple Ratios Offer Symptoms of Financial Health or Malaise
Gary Lenzo, Las Cruces Market President, Century Bank
Operating a successful business requires attention to numbers — especially to basic financial ratios derived from the business’s financial statements.
The current and quick ratios calculate a company’s liquidity, while the debt ratio evaluates its long-term solvency. The gross profit margin shows if sales revenue covers the expenses incurred in making those sales.
Lenders and investors use business health assessments like these to determine if a company qualifies for a loan or is a good candidate for venture capital. Business owners should use them to regularly evaluate their business’s financial standing.
Mentors Help Small-Business Owners Develop Leadership Skills
By Paul Choman, Regional Manager, WESST Enterprise Center in Farmington
Deciding what direction to take a business is isolating for the owner of a small business — especially a sole proprietor. Relatives and friends can offer advice and opinions, but they often lack the expertise to provide the informed, objective counsel the entrepreneur needs.
That’s when a mentor is handy. A mentor is both coach and sage — someone who’s versed in the challenges of running a company and ready to share knowledge with others who need help with business strategies, resources and goals. The best mentors empathize with the people they’re helping and aim to empower them to anticipate and overcome obstacles.
The junior partner in this arrangement isn’t a passive disciple, and the mentor’s word isn’t gospel. Continue reading
Obsession With Sales Can Blind a Business
By Lou Wolter PhD, Integrated Thinking
An observer can always tell a sales-driven business by what its owner thinks and talks about the most. If his chief concerns are cost, price and profit, his is a sales-driven business, not a market-driven one.
Not that cost, price and profit aren’t important to a market-driven business, but they’re not the sole basis for the business decisions of a market-driven venture.
It boils down to the term “driven.” To the degree that an entrepreneur is too focused on how much she makes and what it costs her, her thinking will be too limited to consider all the important things that really determine costs and profits — and the more limited her choice of alternatives and actions when the inevitable challenges arise. Continue reading
Crooks Target Businesses with Creative Scams
By Fidel Gutierrez, Sr. VP, Los Alamos National Bank
In an age when many products sell in cyberspace and the buyer and seller never meet, creative crooks are finding new ways to defraud businesses — especially web-based businesses and individuals selling items through online platforms.
One scheme involves counterfeit versions of a time-honored currency – the cashier’s check.
Scammers commit cashier’s check fraud using an authentic-looking cashier’s check to buy a product. The seller deposits the check and her account is charged for the amount when the check bounces back to the bank as a fake. Continue reading