Glossary & Banking Terms

Accrued Interest - Interest on an account which has been accumulated but not yet paid.

Annual Percentage Rate (APR) - The interest rate that reflects the actual cost of credit on a yearly basis expressed as a percentage.

Annual Percentage Yield (APY) - The interest rate that reflects the actual interest earned on a yearly basis expressed as a percentage.

Assets - Items of monetary value (e.g., house, land, car) owned by an individual or company.

Automated Teller Machine (ATM) - An electronic device through which customers may perform various banking transactions, including withdrawals and deposits.

Balance - In banking, balance refers to the amount of money in a particular account. In credit, balance refers to the amount owed.

Bounced Check - A check that a bank has refused to cash or pay because you have no funds to cover it in your account.

Cashier's Check - A check issued by a bank, drawn on its own funds rather than on one of its depositor's funds.

Certificate of Deposit - A form of savings deposit on which a bank pays principal and interest at a stated maturity date.

Checking Account - Type of account which enables customers to withdraw their own available funds simply by writing a check.

Clear - A check "clears" when its amount is debited (subtracted) from the payer's account and credited (added) to the payee's account.

Collateral - Something of value, securities, evidence of deposit or other property pledged to support the repayment of an obligation.

Compound Interest

Interest calculated not only on the original principal, but also on the interest already accrued.

Deferred Loan - Loans whose principal and or interest installments are postponed for a specified period of time.

Defaults - The nonpayment of principal and/or interest on the due date as provided by the terms and conditions of the note.

Direct Deposit

A method of payment which electronically credits your checking, or savings account; most commonly, payroll and government checks.

Equity - An accounting term used to describe the net investment of owners or stockholders in a business. Under the accounting equation, equity also represents the result of assets less liabilities. The value of property beyond the total amount owed on it in mortgages, liens, etc. Assets minus liabilities;  net worth; capital.

Equity Financing - The provision of funds for capital or operating expenses in exchange for capital stock, stock purchase warrants and options in the business financed, without any guaranteed return, but with the opportunity to share in the company's profits.

Enterprise - Aggregation of all establishments owned by a parent company. An enterprise can consist of a single, independent establishment or it can include subsidiaries or other branch establishments under the same ownership and control.

Entrepreneur - One who assumes the financial risk of the initiation, operation and management of a given business or undertaking.

Fund - A sum of money set aside for particular purpose. Money available for use as in a checking account.

Financial Reports - Reports commonly required from applicants request for financial assistance, e.g.: Balance Sheet - A report of the status of a firm's assets, liabilities and owner's equity at a given time. Income Statement - A report of revenue and expense which s

Financing - New funds provided to a business, by either loans or purchase of debt securities or capital stock.

Gross Domestic Product (Gdp) - The most comprehensive single measure of aggregate economic output. Represents the market value of the total output of the goods and services produced by a nation's economy.

Gross Receipts - Income received from one#s business. Examples of documents that show gross receipts include cash register tapes, bank deposit slips, invoices, receipt books, charge slips, and form.

Guaranteed Loan - A loan made and serviced by a lending institution under agreement that a governmental agency will purchase the guaranteed portion if the borrower defaults.

Insufficient Funds - When a customer's account does not contain enough money to cover a check or withdrawal ticket presented for payment; also referred to as non-sufficient funds (NSF).

Interest - An amount paid a lender for the use of funds.

Lien - The right to hold any property given as a pledge or security until the debt it secures is paid. To constitute a lien, the debt must be enforceable in equity or law; (e.g., a mortgage).

Liability - A legal obligation to pay a debt owed. Current liabilities are debts payable within twelve months. Long-term liabilities are debts payable over a period of more than twelve months.

Lending Institution - Any institution, including a commercial bank, savings and loan association, commercial finance company, or other lender qualified to participate in the making of loans.

Line-of-credit - A lender agrees to allow a borrower to draw a pre-specified amount from an account on an as needed basis.

Loan Agreement - Agreement to be executed by borrower, containing pertinent terms, conditions, covenants and restrictions.

Liquidation - The disposal, at maximum prices, of the collateral securing a loan, and the voluntary and enforced collection of the remaining loan balance from the obligators and/or guarantors.

Maturity Date

The date on which a certificate of deposit, bond or other instrument comes due.

Mortgage
A long-term loan obtained by individuals to buy a home that legally transfers ownership from the debtor to the creditor until the debt is paid.

Net Profit - result obtained when expenses are subtracted from revenues.

Net Worth - Property owned (assets), minus debts and obligations owed (liabilities), is the owner's equity (net worth).

Non-Sufficient Funds (NSF) - See Insufficient Funds.

Official Check

A check that is (1) drawn on a bank, (2) signed by a bank officer or authorized signer on behalf of the bank as a drawer, (3) a direct obligation of the bank, and (4) provided to a customer of the bank or obtained from the bank for remittance purposes.

Overdraft

A check written for more money than is currently in the account. If the bank refuses to cash the check, it is said to have "bounced."

Principal - The original amount of money borrowed, deposited, or invested before interest accrues.

Partnership - A legal relationship existing between two or more persons contractually associated as joint principals in a business.

Pro Forma - financial planning statement that projects future performance.

Prime Rate - Interest rate which is charged business borrowers having the highest credit ratings, for short term borrowing.

Ratio - Denotes relationships of items within and between financial statements, e.g., current ratio, quick ratio, inventory turnover ratio and debt/net worth ratios.

Refinance - To revise a loan agreement to make the terms of payment more suitable to a borrower's present income and ability to repay. Refinancing usually provides a lower interest rate and lower monthly payments over a longer period of time.

Request For Proposals - A document outlining a government agency's requirements and the criteria for the evaluation of offers.

Return On Equity - A measure of a corporation's profitability, specifically its return on assets, calculated by dividing after tax income by tangible assets.

Return On Investment - The amount of profit (return) based on the amount of resources (funds) used to produce it. Also, the ability of a given investment to earn a return for its use.

Service Charge - A monthly fee a bank charges for handling a checking account.

Stop Payment - A request made to a bank to not pay a specific check. If requested soon enough, the check will not be debited from the payer's account. Normally there is a charge for this service.