In finance, Private Equity is an asset class consisting of equity securities and debt in operating companies that are not publicly traded on a stock exchange. A private equity investment will generally be made by a private equity firm, a venture capital firm or an angel investor.
A Stock or any other security representing an ownership interest. On a company’s balance sheet, the amount of the funds contributed by the owners (the stockholders) plus the retained earnings (or losses). Also referred to as “shareholders’ equity”.
A Debt generally refers to money owed by one party, the borrower or debtor, to a second party, the lender or creditor. Debt is generally subject to contractual terms regarding the amount and timing of repayments of principal and interest.
A Bond is a debt investment in which an investor loans money to an entity (typically corporate or governmental) which borrows the funds for a defined period of time at a variable or fixed interest rate. Bonds are used by companies, municipalities, states and sovereign governments to raise money and finance a variety of projects and activities. Owners of bonds are debtholders, or creditors, of the issuer.
Equipment Lease – Obtaining the use of machinery, vehicles or other equipment on a rental basis. This avoids the need to invest capital in equipment. Ownership rests in the hands of the financial institution or leasing company, while the business has the actual use of it.
Leaseback – short for ‘sale-and-leaseback,’ is a financial transaction, where one sells an asset and leases it back for the long-term; therefore, one continues to be able to use the asset but no longer owns it. The transaction is generally done for fixed assets, notably real estate, as well as for durable and capital goods such as airplanes and trains.
‘Line Of Credit – LOC‘ – An arrangement between a financial institution, usually a bank, and a customer that establishes a maximum loan balance that the bank will permit the borrower to maintain.
Revolving Credit is a type of credit that does not have a fixed number of payments, in contrast to installment credit. Credit cards are an example of revolving credit used by consumers. Corporate revolving credit facilities are typically used to provide liquidity for a company’s day-to-day operations. It is basically an arrangement which allows for the loan amount to be withdrawn, repaid, and redrawn again in any manner and any number of times until the arrangement expires. Credit card loans and overdrafts are revolving loans, also called evergreen loan.
‘Accounts Receivable Financing’ A type of asset-financing arrangement in which a company uses its receivables – which is money owed by customers – as collateral in a financing agreement. The company receives an amount that is equal to a reduced value of the receivables pledged.
Factoring is a financial transaction and a type of debtor finance in which a business sells its accounts receivable (i.e., invoices) to a third party (called a factor) at a discount. A business will sometimes factor its receivable assets to meet its present and immediate cash needs.