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Glossary of lending terms
• Bankrate.com
Convertible security
-- A security that can be converted into common stock at the option
of the security holder, including convertible bonds and convertible
preferred stock.
Debenture -- A debt obligation
issued by a Small Business Investment Company (SBIC) and guaranteed
by the Small Business Administration (SBA).
Debt financing -- Raising money
for working capital or for capital expenditures by selling bonds,
bills or notes to individual or institutional investors. In return
for the money lent, the individuals or institutions become creditors
and receive a promise to repay principal and interest on the debt.
Equity financing --
Raising money for working capital by selling common stock or preferred
stock to individual or institutional investors. In return for the
money paid, the individuals or institutions receive ownership interests
in the corporation.
H.R. 68 -- The Small Business
Investment Company Technical Corrections Act is intended to improve
SBIC's ability to offer equity investment, long-term loans and hybrid
loan packages for small businesses. It amends Section 20 of the
Small Business Investment Act of 1958 and makes technical corrections
in Title III of the Small Business Investment Act.
Leverage -- Financial assistance
provided to a licensed SBIC by the SBA, either through the purchase
or guaranty of the SBICs debentures or participating securities,
or the purchase of preferred securities.
Participating securities --
Preferred stock, preferred limited partnership interests, or similar
instruments issued by a licensed SBIC.
Pool -- A group of SBA-guaranteed
debentures or SBA-guaranteed participating securities approved by
the SBA.
Security -- A piece of paper
that can be assigned a value and sold, or any investment made with
the expectation of a profit.
Trust certificates -- Certificates
issued by the SBA representing ownership of all, or a part of a
trust or pool of debentures or participating securities.
Warrant -- A security entitling
the holder to buy stock at some specified future date at a specified
price, usually higher than current market. This "warrant" is then
traded as a security.
Sources: The SBA, Yahoo!Financial
and Investorwords.com
-- Posted: Aapril 8, 1999
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