Refers to growth that comes from adding new offices or manufacturing plants, moving beyond previously defined geographical borders or adding new products or business lines. It does not refer to growth that only comes from increased revenue.
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Exit Strategy
The way an equity investor (See Angel Investor, Venture Capital) plans to cash-out of the company in which they invest so they can realize relatively short-term profits rather than waiting for the company to make substantial profits from sales revenue. An exit strategy could be: an IPO (Initial Public Offering) where a company goes public and shares now have value on the open market; or the sale of the company to a public or private entity.
Established Business
An established business has measurable revenue history for at least two years.
Equity Capital
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)
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.