Amortisation Schedule
A table outlining the portion of the principal and interest paid down at each payment period on a loan with a fixed end-date (e.g. a mortgage)
Cash Flow Drivers
Financial measures that are related to the growth, profitability and efficiency of a business. There are seven drivers of cash flow:
- Accounts Payable
- Accounts Receivable
- Capital Expenditure
- Gross Margin
- Inventory
- Revenue Growth
- Selling, General and Administrative Expenses
Chattel Mortgage
A loan contract that allows the borrower to purchase moveable property (e.g. cars, commercial vehicles, equipment) using the purchased property as security for the loan.
Covenant
One or more conditions listed in a commercial loan that a borrower must fulfil, or that forbids the borrower from undertaking certain actions. Violation of a covenant may result in a loan default or penalties being applied.
Credit Worthiness
An assessment of how likely it is that a borrower will default on any type of debt by failing to make required payments.
General Security Agreement
A document that gives the lender a security interest in a specified asset or property that has been pledged as collateral for a loan.
Line of Credit (LOC)
A loan with revolving credit and an option to redraw up to your agreed limit as you need it.
Loan-to-Value Ratio (LVR)
The value of your loan divided by the value of the loan security (e.g. the property being purchased). The higher the LVR, the riskier a loan is considered to be for the lender.
Management Information Systems (MIS)
A database of financial information that is organised and programmed to produce regular reports on operations at every level of management within a company. It also allows for the generation of specialised reports more easily.
Overdraft
A credit facility attached to your everyday business transaction account that allows you to go into a negative balance and use the bank’s money as credit.
Return On Equity (ROE)
A calculation that measures the profitability of the business based on how much profit the company has generated with the money that shareholders have invested.
Return On Investment (ROI)
A profitability measure that evaluates business performance. This is calculated by dividing the business’ net profit by the business’ net worth.
Serviceability
Your ability to repay a loan. A lender will evaluate your serviceability by conducting a repayment analysis.
Working Capital
Your current assets (inventory, cash, invoices owing) minus your current liabilities (short term debts, upcoming expenses or money you owe to other supplies). Current means anything that will convert to cash within 12 months.