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Glossary of Terms

Set out below is a Glossary of standard transactional terminology for private equity and corporate finance transactions. Use the filter menu if you are looking for a specific term, or to navigate the Glossary alphabetically.

Vendor financeThis can be in the form of either deferred loans or shares. This type of finance is often used when the vendor's expectation of the value of the business is higher than that of the management and the supporting institutions.

Business angelsIndividuals who provide start up finance for entrepreneurs in return for equity. In addition to cash they can also provide industry knowledge and contacts.

Debt financingThe use of borrowed money to finance a business. Different forms of debt can be used to raise money for working capital or capital expenditure such as overdrafts, bank loans, lease financing, commercial mortgage, invoice finance, asset finance or bonds. The loan can be secured or unsecured, short or long-term. The lender receives interest at an agreed rate and if the loan is not repaid may be entitled to take control of or sell assets which are owned by the company.

Private equityA term which covers a range of transactions in which the source of finance is usually a fund established to invest specifically in unquoted companies rather than in publicly quoted shares. It includes forms of venture capital and MBO financing.

Seed capitalAn institutional equivalent of a Business Angel. They provide early stage finance to a company with a business venture or idea which has not yet been established. They may be in the form of funds managing other people's money or may be companies investing in their own right.

Subordinated loanLoans which are ranked after other debt. It is normally repayable after other debt. As such it is more risky for the lender. An example of a subordinated loan is mezzanine finance.

VendorThe individual or company that is selling shares in a company, or the trade and assets of a company.

Venture capitalEquity finance in an unquoted, young company which allows it to start-up, expand or restructure. It is cheaper that bank finance but does involve handing over some control of the company.