Glossary of Terms

We didn't want to let terminology prevent you from achieving your crowdfunding marketing success. So we put together all the definitions you will ever need to be a crowdfunding rockstar. 

Legal Disclaimer:
Please be advised that the materials and information in the CrowdfundingCRM.com website including this glossary are for informational purposes only and not for the purpose of providing legal or tax advice. Some of the topics and information discussed include complicated areas of law and legal advice and should be obtained and relied upon from a securities attorney about based on your specific crowdfunding campaign.

A/B TESTING

This is the process of comparing two variations of a single variable to determine which performs best in order to help improve marketing efforts. Primarily, this is done in email marketing (with variations in the subject line or copy), calls-to-action (variations in colors or verbiage), and landing pages (variations in content)

ACCOUNTS PAYABLE

Trade accounts of businesses representing obligations to pay for goods and services received.

ACCOUNTS RECEIVABLE

Trade accounts of businesses representing moneys due for goods sold or services rendered evidenced by notes, statements, invoices, or other written evidence of a present obligation.

ACCOUNTING

The recording, classifying, summarizing, and interpreting in a significant manner and in terms of money, transactions, and events of a financial character.

ACCREDITED INVESTOR

The federal securities laws define the term “accredited investor” in Rule 501 of Regulation D as:

A business in which all the equity owners are accredited investors, or a natural person who has individual net worth, or joint net worth with the person’s spouse, that exceeds $1 million at the time of the purchase, excluding the value of the primary residence of such person, a natural person with income exceeding $200,000 in each of the two most recent years or joint income with a spouse exceeding $300,000 for those years and a reasonable expectation of the same income level in the current year, a bank, or a insurance company, registered investment company, business development company, or small business investment company, an employee benefit plan, if the plan has total assets in excess of $5 million, a charitable organization, corporation, or partnership with assets exceeding $5 million, or a director, executive officer, or general partner of the company selling the securities or a trust with assets in excess of $5 million, not formed to acquire the securities offered, whose purchases a sophisticated person makes. 

A central marketing database. A place for all your marketing data, including detailed prospect and customer interactions and behaviors, so you can segment and target the right message to each customer. Think of this as “system of record” for all your marketing information.

An engagement marketing engine. An environment for the creation, management and automation of marketing processes and conversations across online and offline channels. Think of this as the "orchestra conductor" for your customer interactions.

An analytics engine. A way to test, measure, and optimize marketing ROI and impact on revenue. Think of this as the place you go to understand what worked, what didn’t, and where you can improve.

AMORTIZATION

As opposed to an interest-only loan in which each repayment installment consists only of interest payments with a single lump-sum principal repayment at the end of the loan period, each repayment installment of an amortizing loan consists of both principal and interest.

APPRECIATION

An increase in value is referred to as “appreciation”.

ASSUMPTIONS

The act of assuming/undertaking another’s debts or obligations.

ANGEL INVESTOR 

An angel investor or angel (also known as a business angel or informal investor) is an affluent individual who provides capital for a business start-up, usually in exchange for convertible debt or ownership equity.

Read more at: https://www.equitynet.com/crowdfunding-terminology/what-is-angel-investor-definition

All-or-Nothing Crowdfunding

If a campaign reaches its goals and objectives, then the entrepreneurs in receipt of the funds get to keep them, If they don't meet all of the stated raise they  will receive nothing. 

AUCTION

A public sale of goods to the highest bidder.

BANKRUPTCY

A condition in which a business cannot meet its debt obligations and petitions a federal district court for either reorganization of its debts or liquidation of its assets. In the action the property of a debtor is taken over by a receiver or trustee in bankruptcy for the benefit of the creditors. This action is conducted as prescribed by the National Bankruptcy Act, and may be voluntary or involuntary.

BACKER

A backer is the name for the people who provide funding for a person or project

BLOGGING

This is short for web log or weblog. An individual or group of people usually maintains a blog. A personal blog or business blog will traditionally include regular entries of commentary, descriptions of events, or other material, such as photos and video. Blogging is a core component of inbound marketing as it can accomplish several initiatives simultaneously, such as website traffic growth, thought leadership, and lead generation.

BLUE SKY LAWS 

A state law that imposes standards for offering and selling securities.  Such laws aim to protect individuals from fraudulent or overly speculative investments. 

BREAKEVEN POINT

The breakeven point in any business is that point at which the volume of sales or revenues exactly equals total expenses – the point at which there is neither a profit nor loss – under varying levels of activity. The breakeven point tells the manager what level of output or activity is required before the firm can make a profit; reflects the relationship between costs, volume, and profits.

BROKER DEALER

A broker-dealer is a person or firm in the business of buying and selling securities, operating as both a broker and a dealer, depending on the transaction. 

The term broker-dealer is used in U.S. securities regulation parlance to describe stock brokerages because most of them act as both agents and principals. 

A brokerage acts as a broker (or agent) when it executes orders on behalf of clients, whereas it acts as a dealer (or principal) when it trades for its own account. 

BURN RATE

The rate in which a new firm spends its initial capital. In the early stages of your company you will simply be spending, running at a loss, before emerging into profitability and positive cash flows. The two most common questions for early stage companies are: what is your burn rate? and subsequently: what is your cash zero date?

BUSINESS BIRTH

Formation of a new establishment or enterprise.

BUSINESS DEATH 

Voluntary or involuntary closure of a firm or establishment.

BUSINESS DISSOLUTION

For enumeration purposes, the absence from any current record of a business that was present in a prior time period.

BUSINESS FAILURE

The closure of a business causing a loss to at least one creditor.

BUSINESS PLAN

A comprehensive planning document which clearly describes the business developmental objective of an existing or proposed business. The plan outlines what and how and from where the resources needed to accomplish the objective will be obtained and utilized. It should include the Business Description, Marketing Plan, Management Plan and Financial Plan.

BUSINESS START

For enumeration purposes, a business with a name or similar designation that did not exist in a prior time period.

CANCELED LOAN

The annulment or rescission of an approved loan prior to disbursement.

CAPITAL

Assets less liabilities, representing the ownership interest in a business; a stock of accumulated goods, especially at a specified time and in contrast to income received during a specified time period; accumulated goods devoted to the production of goods; (4) accumulated possessions calculated to bring income.

CAPITAL EXPENDITURES 

Business spending on additional plant equipment and inventory.

CAPITALIZED PROPERTY

Personal property of the agency which has an average dollar value of $300.00 or more and a life expectancy of one year or more. Capitalized property shall be depreciated annually over the expected useful life to the agency.

CASH DISCOUNT

An incentive offered by the seller to encourage the buyer to pay within a stipulated time. For example, if the terms are 2/10/N 30, the buyer may deduct 2 percent from the amount of the invoice (if paid within 10 days); otherwise, the full amount is due in 30 days.

CASH FLOW

An accounting presentation showing how much of the cash generated by the business remains after both expenses (including interest) and principal repayment on financing are paid. A projected cash flow statement indicates whether the business will have cash to pay its expenses, loans, and make a profit. Cash flows can be calculated for any given period of time, normally done on a monthly basis.

CHARACTER

A letter, digit, or other symbol that is a part of the organization, control, or representation of data used in computer systems.

CHARGE-OFF

An accounting transaction removing an uncollectible balance from the active receivable accounts.

CHARGED OFF LOAN

An uncollectible loan for which the principal and accrued interest were removed from the receivable accounts.

CLOSING

Actions and procedures required to affect the documentation and disbursement of loan funds after the application has been approved and the execution of all required documentation and its filing and recording where required.

CLOSED LOAN

Any loan for which funds have been disbursed and all required documentation has been executed, received, and reviewed. For statistical purposes, first or total disbursement is counted as a closed loan.

COLLATERAL

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

COLLATERAL DOCUMENT

A legal document covering the item(s) pledged as collateral on a loan, i.e., note, mortgages, assignment, etc.

CONSORTIUM

A coalition of organizations, such as banks and corporations, set up to fund ventures requiring large capital resources.

CONTRA ACOUNTS 

Are reversals of sales made or otherwise deductions from Gross Revenue (Sales) that occur as a result of Bad Debt, Returns, Refunds and other such allowances that reverse the effect of income generated by the initial sale

CORPORATION 

A group of persons granted a state charter legally recognizing them as a separate entity having its own rights, privileges, and liabilities distinct from those of its members. The process of incorporating should be completed with the state’s secretary of state or state corporate counsel, and usually requires the services of an attorney.

COMPROMISE

The settlement of a claim resulting from a defaulted loan for less than the full amount due. Compromise settlement is a procedure available for use only in instances where the government cannot collect the full amount due within a reasonable time, by enforced collection proceedings, or where the cost of such proceedings would not justify such effort.

CONTINGENT LIABILITY

A potential obligation that may be incurred dependent upon the occurrence of a future event. Two examples are: (1) the liability of an endorser or guarantor of a note if the primary borrower fails to pay as agreed and (2) the liability that would be incurred if a pending lawsuit is resolved in the other party’s favor.

COSTS

Money obligated for goods and services received during a given period of time, regardless of when ordered or whether paid for.

CREDIT RATING

A grade assigned to a business concern to denote the net worth and credit standing to which the concern is entitled in the opinion of the rating agency as a result of its investigation.

CROWDCASTING

Is a way for entrepreneurs to send an email  to their personal contacts in order to build exposure for their company. This allows entrepreneurs to drive web traffic to their profile.  This traffic can be for marketing purposes and for exposure to potential investors.The process of crowdcasting uses a combination of push and pull strategies to first engage an audience and build a network of participants and then harness the network for new insights.

CROWDFUNDING

Crowdfunding is a way people can raise capital to launch a new product or service, or start a new business or fund other company objectives, by  preparing a campaign as described in the Crowdfunding task and action planning tool putting out a call for financial support to the public, typically on the Internet Supporters then pledge to fund the project or cause with a certain amount of money, and if the total pledges received meets or exceed's the goal, the supporters make their donation (they do not have to contribute if the goal amount is not reached).

CROWDFUNDING PLATFORM

An online portal or intermediary that allows projects to be represented on the web portal to attract backers, investors, and donors

DATA ELEMENT

The basic unit of identifiable and definable information. A data element occupies the space provided by fields in a record or blocks on a form. It has an identifying name and value or values for expressing a specific fact. For example, a data element named “Color of Eyes” could have recorded values of “Blue (a name),” “Bl (an abbreviation),” “06 (a code).” Similarly, a data element named “Age of Employee” could have a recorded value of “28” (a numeric value).

DEBENTURE

Debt instrument evidencing the holder’s right to receive interest and principal installments from the named obligor. Applies to all forms of unsecured, long-term debt evidenced by a certificate of debt.

DEBT CAPITAL

Business financing that normally requires periodic interest payments and repayment of the principal within a specified time.

DEBT-BASED CROWDFUNDING 

Instead of seeking equity capital by offering shares in a company, the borrower posts a loan request on a loan finance crowdfunding website.Traditional banks and other traditional intermediaries don’t play a role in this kind of transaction. Debt-based crowdfunding and loan finance crowdfunding are often referred to as Peer-to-Peer or P2P lending.

DEBT FINANCING

The provision of long-term loans to small business concerns in exchange for debt securities or a note.

DEED OF TRUST

A document under seal which, when delivered, transfers a present interest in property. May be held as collateral.

DEFAULTS

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

DEFERRED LOAN

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

DILUTION

A reduction in the value of a shareholding due to the issue of additional shares in a company without an increase in assets.

DISBURSEMENT

The actual payout to borrower of loan funds, in whole or part. It may be concurrent with the closing or follow it.

DISBURSING OFFICER

An employee authorized to pay out cash or issue checks in settlement of vouchers approved by a certifying officer.

DIVIDENDS

A sum of money paid regularly (typically annually) by a company to its shareholders out of its profits (or reserves).

DIVESTITURE
Change of ownership and/or control of a business from a majority (non-disadvantaged) to disadvantaged persons.

DONATION OR NON PROFIT CROWDFUNDING 

A crowdfunding model where individuals donate money to projects usually characterized as charitable or have social benefits.

DUE DILIGENCE 

Be prepared to provide detailed disclosures of pertinent facts, positive and negative, that any lender/investor should know about, such as:

Company Administration, Company Charter Structure, Company Interest Structure, Shareholder Interest Structure, Accounting & Financial, Legal & Regulatory, Management & Employees, and Consultants/Advisors & Contractors. 

EARNING POWER

The demonstrated ability of a business to earn a profit, over time, while following good accounting practices. When a business shows a reasonable profit on invested capital after fully maintaining the business property, appropriately compensating its owner and employees, servicing its obligations, and fully recognizing its costs, the business may be said to have demonstrated earning power. Demonstrated earning power is the foremost test of the business risk in pressing upon an application for a loan.

ELEVATOR PITCH

Elevator pitch” in as little as a one-minute. You have to convey all the essential information in a clear and concise manner, communicating in a tone that’s like able, passionate and also credible. Remember, the elevator pitch is not designed to take the place of a solid business plan, but is simply intended to capture the attention of a potential investor. If you achieve that, the odds are good that you’ll get a chance to present your business idea in more detail at a later time (part of why having a complete business plan is also a must).

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.

EQUITY

An ownership interest in a business.

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. Equity financing includes long-term subordinated securities containing stock options and/or warrants. Utilized in SBIC financing activities.

EQUITY PARTNERSHIP

A limited partnership arrangement for providing startup and seed capital to businesses.

ESCROW ACCOUNTS

Funds placed in trust with a third party by a borrower for a specific purpose and to be delivered to the borrower only upon the fulfillment of certain conditions. The funds are held by the escrow service until it receives the appropriate written or oral instructions or until obligations have been fulfilled. Securities, funds and other assets can be held in escrow. 

EQUITY CROWDFUNDING - TITLE III 4(a((6) 

This rule has created an exemption under current securities laws to allow unaccredited investors to participate in equity crowdfunding.  A process that uses the Internet and related social media to offer a company's stock to over 240 million investors. 

Equity-based crowdfunding involves an investor receiving a portion of the company in return for his or her investment. Essentially, the investor will become a shareholder in the company. There are certain risks to equity-based crowdfunding as with any other types of investments.

ESTABLISHMENT

A single-location business unit, which may be independent – called a single- establishment enterprise – or owned by a parent enterprise.

EXECUTIVE SUMMARY OVERVIEW 

Create a summarized narrative of your business plan to tell your company’s story to lenders/investors in a few pages.

EXIT STRATEGY

The method by which a venture capitalist or business owner intends to get out of an investment that he or she has made in the past. Usually it comes in the form of IPO, acquisition by a larger company or selling assets.

FACEBOOK

As the goliath of the social networks, Facebook is a volatile sandbox of opportunity for any inbound marketer. It provides marketers an opportunity to reach a HUGE audience (over 1.15 billion to be exact), engage said audience, and subsequently grow their business. While it’s a core component of an inbound marketing strategy, it shouldn’t be the only component. Focusing entirely on Facebook (or any other large social channel, for that matter) will only give you a small piece of the inbound marketing pie. And it’s still piping hot, so be careful.

FAN – A fan is someone who is dedicated to a Crowdfunded project, but who may not contribute money to it.  Instead, they promote the project, comment on the page and create a buzz and enthusiasm for the campaign.

FINANCIAL STATEMENTS

Balance Sheet – A report of the status of a firm’s assets, liabilities and owner’s equity at a given time. This is an accounting statement listing the book value (recorded at cost or market value) of the Assets (property and other things of value that the company owns), the face value amount of its Liabilities (financial obligations such as debts that the company owe), and Shareholders’ Equity (he net worth of the company which is figured by subtracting the dollar amount of its total liabilities from the book value of its total assets ).

Balance Sheet Formula:
Assets – Liabilities = Shareholders Equity (or Net Worth)

Income Statement – A report of revenue and expense which shows the results of business operations or net income for a specified period of time. This is an accounting statement showing the flow of Income, Expenses, and Earnings Before Income Tax (EBIT) and Net Income After Taxes (NIAT). Income is considered to be the incoming payments of cash earned from the revenue generating activities (hence operations) such as from sales transactions, service fees/charges, collected rents, and any other activity that the company engages in to earn revenue. Expenses are the outgoing monetary payments made on a recurring basis in order to operate the company. Earnings Before Income Tax (EBIT) is figured by subtracting Total Expenses from Total Income, and Net Income After Taxes (NIAT) is figured by subtracting the Allowance for Income Tax from the Earnings Before Income Taxes (EBIT).

Income Statement Formula:
Income – Expenses = Earnings Before Income Taxes
Earnings Before Income Taxes – Allowance for Income Taxes = Net Income After Taxes Net Income After Taxes – Dividends Paid on Common Stock = Retained Earnings

*Retained Earnings are funds left to run the company after paying out dividends or profits distributions to shareholders.

Cash Flow - A report which analyzes the actual or projected source and disposition of cash during a past or future accounting period.This is an accounting statement showing the inflow and outflow of cash and other assets into and out of the company. Cash Flows from Operations relate to cash flowing in and out of the company from revenue and expense items engaged in to turn a net income profit (or loss). Cash Flows from Capital Transactions or Other Activities relate to cash and other assets flowing in and out of the company from capital transactions such as from the sale and redemption (repurchasing) of the company’s stock to and from shareholders, the incurring of debt capital and repayment of principal on loans, the purchase and sale of capital or fixed assets, the payout and redemption of refundable deposits, the receipt or payout of judgments and settlements in connection with lawsuits, and any other transactions where cash or other assets flows into or out of the company that is not directly related to generating a profit (or loss), and cannot otherwise be classified as revenue, earnings, taxable income, or expenses.

Cash Flow Statement Formula:
Source of Funds from Operations + Source of Funds from Capital Transactions
= Total Source of Funds (Net Cash In)
Total Source of Funds – Total Use of Funds = Increase (Decrease) in Working Capital

Now that you are familiar with the three segments of what composes Principal Financial Statements you must know that the numerical summaries usually deal with 2 types of reporting periods known as Current and Proforma. 
The Current Financial Statements reflect the present position of the company’s finances accounting for activity occurring over the past fiscal year, while the Proforma Financial Statements reflect the forecasted position of the company’s finances in the future, and the future periods covered in this version is for the first 12 months and extends to the next 3 years.

FINANCING

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

FINRA

The Financial Industry Regulatory Authority is responsible for governing business between brokers, dealers and the investing public. FINRA aims to eliminate regulatory overlap and cost inefficiencies.

FLOW CHART

A graphical representation for the definition, analysis, or solution of a problem, in which symbols are used to represent operations, data, flow, equipment, etc.

FORECLOSURE

The act by the mortgagee or trustee upon default in the payment of interest or principal of a mortgage of enforcing payment of the debt by selling the underlying security.

FRANCHISING

A continuing relationship in which the franchisor provides a licensed privilege to the franchisee to do business and offers assistance in organizing, training, merchandising, marketing, and managing in return for a consideration. Franchising is a form of business by which the owner (franchisor) of a product, service, or method obtains distribution through affiliated dealers (franchisees). The product, method, or service being marketed is usually identified by the franchisor’s brand name, and the holder of the privilege (franchisee) is often given exclusive access to a defined geographical area.

FUNDING PORTAL

A funding portal is defined as a crowdfunding intermediary that does not:  (1) offer investment advice or recommendations.  (2) solicit purchases, sales, or offers to buy securities offered or displayed on its website or portal.   (3) compensate employees, agents, or others persons for such solicitation or based on the sale of securities displayed or referenced on its website or portal.  (4) hold, manage, possess or otherwise handle investor funds or securities. (5) engage in such other activities as the SEC, by rule, determines appropriate.

GAAP

Is an acronym for Generally Accepted Accounting Principles which is a national American standard of financial statement reporting instituted by the Financial Accounting Standards Board (FASB).

GENERAL SOLICITATION

General solicitation involves publicly seeking an offer through advertising or mass communication such as marketing automation, social media, and PR.

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 NATIONAL PRODUCT (GNP)

A measure of a nation’s aggregate economic output. Since 1991 GDP, a slightly different calculation, has replaced GNP as a measure of U.S. economic output.

GUARANTEED LOAN

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

HARDWARE

A term used to describe the mechanical, electrical, and electronic elements of a data processing system.

HAZARD INSURANCE

Insurance required showing lender as loss payee covering certain risks on real and personal property used for securing loans.

INCUBATOR

A facility designed to encourage entrepreneurship and minimize obstacles to new business formation and growth, particularly for high technology firms, by housing a number of fledgling enterprises that share an array of services. These shared services may include meeting areas, secretarial services, accounting services, research libraries, on-site financial and management counseling, and word processing facilities.

INDEPENDENT AND QUALIFIED PUBLIC ACCOUNTANTS 

Public accountants are independent when neither they nor any of their family have a material, direct, or indirect financial interest in the borrower other than as an accountant. They are qualified unless there is contrary evidence when they are either (1) certified, licensed, or otherwise registered if so required by the state in which they work, or (2) have worked as a public accountant for at least five years and are accepted by SBA.

INDUSTRIAL REVENUE BOND (IRB)

A tax-exempt bond issued by a state or local government agency to finance industrial or commercial projects that serve a public good. The bond usually is not backed by the full faith and credit of the government that issues it, but is repaid solely from the revenues of the project and requires a private sector commitment for repayment.

INBOUND MARKETING

A marketing tactic that brings buyers to you through a combination of SEO; valuable marketing content like white papers, webinars, blog posts, videos; and social media. Inbound marketing is becoming a popular (and cheaper) alternative to the outbound, “push-style” marketing tactics of the past.

ISSUER 

A legal entity whose responsibility is to develop, register and sell securities for the purpose of financing its operations.

IP Address (Internet Protocol Address): A number assigned to each device participating in a computer network that uses the Internet Protocol for communication. Most marketing automation systems recognize the IP addresses of website visitors to potentially identify anonymous visitors.

INNOVATION

Introduction of a new idea into the marketplace in the form of a new product or service or an improvement in organization or process.

INSOLVENCY
The inability of a borrower to meet financial obligations as they mature or having insufficient assets to pay legal debts.

INTEREST
An amount paid a lender for the use of funds.

INTRASTATE CROWDFUNDING

Since the passage of the JOBS Act, advocates of equity crowdfunding have moved to legalize intrastate – or in state – crowdfunding.

IPO

The first sale of stock by a private company to the public. IPOs are often issued by smaller, younger companies seeking the capital to expand, but can also be done by large privately owned companies looking to become publicly traded. REGA+ is now referred to as mini IPO.

INVERSE ORDER OF MATURITY

When payments are received from borrowers that are larger than the authorized repayment schedules, the overpayment is credited to the final installments of the principal, which reduces the maturity of the loan and does not affect the original repayment schedule.

INVESTMENT BANKING

Businesses specializing in the formation of capital. This is done by outright purchase and sale of securities offered by the issuer, standby underwriting, or “best efforts selling.”

INVITATION FOR BIDS

Formal solicitations for offerings to perform procurements by competitive bids when the specifications describe the requirements of the government clearly, accurately, and completely, but avoiding unnecessarily restrictive specifications or requirements which might unduly limit the number of bidders.

JOBS Act

Jumpstart Our Business Startups Act (JOBS) act: The JOBS act was created in order to ease security regulations on small businesses. The JOBS act was signed by President Barack Obama on April 5, 2012.

The titles of the bill are:

TITLE I - REOPENING AMERICAN CAPITAL MARKETS TO EMERGING GROWTH COMPANIES
TITLE II - ACCESS TO CAPITAL FOR JOB CREATORS
TITLE III - CROWDFUNDING
TITLE IV - SMALL COMPANY CAPITAL FORMATION
TITLE V - PRIVATE COMPANY FLEXIBILITY AND GROWTH
TITLE VI - CAPITAL EXPANSION
TITLE VII - OUTREACH ON CHANGES TO THE LAW OR COMMISSION

JOBS ACT – Title II (Access to Capital for Job Creators): Title II lifts the ban on advertising for regulation D, Rule 506 and Rule 144A offerings. It also lifts the ban on general solicitation.

JOBS ACT – Title III (Crowdfunding): Title III allows individuals to make investments in small companies without being accredited investors. The company is allowed to receive up to $1 million over any 12-month period. Investors may not purchase more than $2,000 in securities or a certain percentage of his or her annual income or net worth as long as it is under $100,000 during a 12-month period.

JOBS ACT- Title IV Regulation A+ 

Tier 1,  consist of securities offerings of up to $20 million in a 12-month period, with not more than $6 million in offers by selling security-holders that are affiliates of the issuer.

Tier 2, consist of securities offerings of up to $50 million in a 12-month period,with not more than $15 million in offers by selling security-holders that are affiliates of the issuer.

In addition to the limits on secondary sales by affiliates, the rules also limit sales by all selling security-holders to no more than 30 percent of a particular offering in the issuer’s initial Regulation A offering and subsequent Regulation A offerings for the first 12 months following the initial offering.

JOB DESCRIPTION

A written statement listing the elements of a particular job or occupation, e.g., purpose, duties, equipment used, qualifications, training, physical and mental demands, working conditions, etc.

JUDGMENT

Judicial determination of the existence of an indebtedness or other legal liability.

JUDGMENT BY CONFESSION 

The act of debtors permitting judgment to be entered against them for a given sum with a statement to that effect, without the institution of legal proceedings.

JUNK BOND 

A high-yield corporate bond issue with a below-investment rating that became a growing source of corporate funding in the 1980s.

LANDING PAGE or SALES FUNNEL- FOR CROWDBUILDING

A separate project/campaign page which contains the necessary information and details of the project to drive and build traffic. A visitor is an anonymous individual who comes to your site. Once they convert and provide contact information, they become a lead. A lead becomes an opportunity once contact is made and there is a chance you will close the deal.

A landing page is a specific web page that is typically reached through clicking a link or advertisement. This page should display content that is specific to the advertisement, search keyword, or link clicked. 

It may have a form, white paper, webinar, or other content, and usually features some sort of call to action.

Lead (or Demand) Generation: Creating interest in your product or service while priming your buyers for later conversations with sales.

Lead Management: Lead management involves identifying, tracking, and managing  leads from the point of lead generation to conversion.

Lead Nurturing (or Drip Marketing): allows correspondence to be sent to the prospects on a specific list at specific intervals based on time or prospect activities. Use drip programs for ongoing marketing campaigns and to nurture leads that may not be sales-ready.

Lead Scoring: Assigning a numerical value to leads to indicate how interested they are in your product or service. Combined with lead grading, this is a good gauge of when leads are ready to be contacted.

LEASE

A contract between the owner (lessor) and the tenant (lessee) stating the conditions under which the tenant may occupy or use the property.

LEGAL RATE OF INTEREST

The maximum rate of interest fixed by the laws of the various states which a lender may charge a borrower for the use of money.

LENDING INSTITUTION

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

LEVERAGED BUY-OUT

The purchase of a business with financing provided largely by borrowed money, often in the form of junk bonds.

LIEN

A charge upon or security interest in real or personal property maintained to ensure the satisfaction of a debt or duty ordinarily arising by operation of law.

LIQUIDITY EVENTS

A liquidity event refers to the process by which an investor monetizes its investment in a private company. They can include a sale or merger with another company, or taking the public company through an initial public offering (IPO), and can also be achieved by having the company pay out some or all of its cash flow in dividends. Investments in private companies are said to be "illiquid" because the stock isn't traded in a public stock exchange which allows for the stock to be sold. For private company owners, a liquidity event results from the sale of their business, as it is the moment when the value created and retained in the business is monetized. 

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.

LIQUIDATION VALUE

The net value realizable in the sale (ordinarily a forced sale) of a business or a particular asset.

LITIGATION

Refers to a loan in “liquidation status” which has been referred to attorneys for legal action. Also: The practice of taking legal action through the judicial process.

LOAN BASED ( PEER TO PEER ) CROWDFUNDING

Through this model, individuals may approach other professionals for a loan in return for interest. Those unable to acquire a traditional loan and/or wish to find a feasible alternative may wish to investigate debt-based crowdfunding further.

LOAN AGREEMENT

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

LOAN PAYOFF AMOUNT 

The total amount of money needed to meet a borrower’s obligation on a loan. It is arrived at by accruing gross interest for one day and multiplying this figure by the number of days that exist between the date of the last repayment and the date on which the loan is to be completely paid off. This amount, known as accrued interest, is combined with the latest principal and escrow balances that are applicable to what is now referred to as the loan payoff amount. In the case where prepaid interest exceeds the accrued interest, the latter is subtracted from the former and the difference is used to reduce the total amount owed.

LOSS RATE

A rate developed by comparing the ratio of total loans charged off to the total loans disbursed from inception of the program to the present date.

LOSS RESERVE ADJUSTMENT RATE

A reserve rate based upon the ratio of the aggregate net chargeoffs (chargeoffs less recoveries) for the most recent five years to the total average loans outstanding for the comparable 5-year period.

MARKUP

Markup is the difference between invoice cost and selling price. It may be expressed either as a percentage of the selling price or the cost price and is supposed to cover all the costs of doing business plus a profit. Whether markup is based on the selling price or the cost price, the base is always equal to 100 percent.

MATURITY

As applied to securities and commercial paper, the period end date when payment of principal is due.

MATURITY EXTENSIONS 

Extensions of payment beyond the original period established for repayment of a loan.

MERGER

A combination of two or more corporations wherein the dominant unit absorbs the passive ones, the former continuing operation usually under the same name. In a consolidation two units combine and are succeeded by a new corporation, usually with a new title.

MORTGAGE

An instrument giving legal title to secure the repayment of a loan made by the mortgagee (lender). In legal contemplation there are two types: (1) title theory – operates as a transfer of the legal title of the property to the mortgagee, and (2) lien theory – creates a lien upon the property in favor of the mortgagee.

NEGOTIATION

The face to face process used by local unions and the employer to exchange their views on those matters involving personnel policies and practices or other matters affecting the working conditions of employees in the unit and reduced to a written binding agreement. Used also by contracting officers to reach agreement with potential contractors.

NET WORTH

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

NOTES AND ACCOUNTS RECEIVABLE

A secured or unsecured receivable evidenced by a note or open account arising from activities involving liquidation and disposal of loan collateral.

OBLIGATIONS

Technically defined as “amount of orders placed, contracts awarded, services received, and similar transactions during a given period which will require payments during the same or a future period.”

OPTIONS 

A financial derivative security which permits the purchaser the right but not the obligation to buy or sell a security at a predetermined price during a specified period of time.

ORDINARY INTEREST

Simple interest based on a year of 360 days, contrasting with exact interest having a base year of 365 days.

OUTLAYS

Net disbursements (cash payments in excess of cash receipts) for administrative expenses and for loans and related costs and expenses (e.g., gross disbursements for loans and expenses minus loan repayments, interest and fee income collected, and reimbursements received for services performed for other agencies).

PARTNERSHIP

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

PATENT

A patent for an invention is the grant of a property right to the inventor, issued by the Patent and Trademark Office. The term of a new patent is 20 years from the date on which the application for the patent was filed in the United States or, in special cases, from the date an earlier related application was filed, subject to the payment of maintenance fees. US patent grants are effective only within the US, US territories, and US possessions.

PLEDGE

This is a term used to describe the promise to pay the person/people crowdfunding the defined amount

PRE-MONEY  VALUATION

The company’s value prior to an investment.

POST -MONEY VALUATION

The company’s value post outside investment of financing.

PRIME RATE

Interest rate which is charged to business borrowers having the highest credit ratings for short term borrowing.

PRIVATE PLACEMENT 

This involves the sale of equities to a small number of investors in order to raise capital.

PRO-NET

An Internet-based database of information of small, disadvantaged, 8(a), and women-owned businesses seeking procurement contracts.

PRODUCT LIABILITY

Type of tort or civil liability that applies to product manufacturers and sellers.

PROFESSIONAL AND TRADE ASSOCIATIONS 

Non-profit, cooperative, and voluntary organizations that are designed to help their members in dealing with problems of mutual interest. In many instances, professional and trade associations enter into an agreement with the SBA to provide volunteer counseling to the small business community.

PROPRIETORSHIP

The most common legal form of business ownership; about 85 percent of all small businesses are proprietorships. The liability of the owner is unlimited in this form of ownership.

PROTEST

A statement in writing by any bidder or offeror on a particular procurement alleging that another bidder or offeror on such procurement is not a small business concern.

RATIO

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

P/E Ratio- A measurement tool frequently used in the investment industry and calculated by dividing the price per share by the earnings per share.

P/S Ratio- A measurement tool frequently used in the investment industry and calculated by dividing the company’s market cap by the sales revenue.

REGULATION A+ TITLE IV

Adopts Regulation A+ Rules As amended, Regulation A now provides an exemption from registration for certain issuers offering up to US  $50 million of securities in a 12-month period. 

On June 19, 2015, JOBS Act- Regulation A+ Title IV rules adopted by the U.S. Securities and Exchange Commission became effective. Reg A+ provides an important capital-raising alternative for private companies in the United States and Canada. 

REWARD CROWDFUNDING

Funds raised for projects are provided by a community of BACKERS who receive some sort of reward in return for their contribution. In most cases, these rewards are the product or service the entrepreneur plans to create. 

REQUEST FOR PROPOSALS 

Solicitations for offerings for competitive negotiated procurements when it is impossible to draft an invitation for bids containing adequate detailed description of the required property and services. There are 15 circumstances in the Federal Acquisition Regulations (FAR) which permit negotiated procurements.

RETURN ON INVESTMENT  (ROI)

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.

A performance measure used to evaluate the efficiency of an investment or to compare the efficiency of a number of different investments. To calculate ROI, the benefit (return) of an investment is divided by the cost of the investment; the result is expressed as a percentage or a ratio.

SEC

The SEC is a federal agency that enforces federal securities laws and oversees the securities industry.

SECONDARY MARKET

A market where investors purchase securities or assets from other investors, rather than from issuing companies themselves. And those who purchase an interest in a loan from an original lender, such as banks, institutional investors, insurance companies, credit unions, and pension funds.

SEO

SEO (or Search Engine Optimization) is the practice of enhancing where a webpage appears in search results. By adjusting a webpage's on-page SEO elements and influencing off-page SEO factors an inbound marketer can improve where a webpage appears in search engine results.

SHARE HOLDERS AGREEMENT 

A contract/ agreement among shareholders of a company that describes rights and obligations.

SHARES OF STOCK

Class A Shares   

A specific share class that can be accompanies by more or less voting rights than class B shares. Typically Class A shares have more voting rights.

Class B Shares    

A specific share class that can be accompanies by more or less voting rights than class B shares. Typically Class A shares have less voting rights.

Ordinary share  

A share entitling its holder to dividends which vary in amount and may even be missed, depending on the fortunes of the company.

SOCIAL MEDIA 

Social media is media designed to be disseminated through social interaction, created using highly accessible and scalable publishing techniques. Facebook, Twitter, YouTube, LinkedIn and Google+ are examples of social media networks that one can join for personal or business use. Social Media is a core component of Inbound, as it provides marketers with additional channels to spread reach, increase growth, and reach business goals.

SWAG

The items that are used as perks or promotions as rewards for a project.  

These may include bookmarks of a book's cover, a t-shirt, branded cap and other merchandise related to the project.

TERM SHEET

A non-binding agreement setting forth the basic terms and conditions under which an investment will be made. A term sheet serves as a template to develop more detailed legal documents.

TURNOVER (Business)

Turnover is the number of times that an average inventory of goods is sold during a fiscal year or some designated period. Care must be taken to ensure that the average inventory and net sales are both reduced to the same denominator; that is, divide inventory at cost into sales at cost or divide inventory at selling price into sales at selling price. Do not mix cost price with selling price. The turnover, when accurately computed, is one measure of the efficiency of a business.

TWITTER

For the sake of creativity, I’ll define Twitter in 140 characters or less: “Twitter is a platform that allows users to share 140-character long messages publicly. User can follow one another and be followed back.”

TESTING THE WATERS - SEC RULE 255- TITLE IV  REGULATION A+  

Allows you to communicate with potential investors to gauge interest before raising money or formally registering with the SEC.  This provision allows companies to "test the waters" and determine if there is any interest in its investment offering in a non-binding way before it has filed anything with the SEC, prepared any offering materials, hired counsel, engaged an accountant, or even formed the company that will offer securities.  

UNDELIVERED ORDERS

The amount of orders for goods and services outstanding for which the liability has not yet accrued. For practical purposes, represents obligations incurred for which goods have not been delivered or services not performed.

UNFAIR LABOR PRACTICE

Action by either the employer or union which violates the provisions of EO 11491 as amended.

UNIFORM COMMERCIAL CODE

Codification of uniform laws concerning commercial transactions. In SBA parlance, generally refers to a uniform method of recording and enforcing a security interest or charge upon existing or to be acquired personal property.

UNACCREDITED INVESTOR

This is any person who does not meet the net worth requirements for an accredited investor under the Securities & Exchange Commission's Regulation D. 

A non-accredited individual investor is one who has a net worth of less than $1 million (including spouse) and who earned less than $200,000 annually ($300,000 with spouse) in the last two years. They can invest in Title III ( 4) (a) (6) or Regulation A+ Title IV of the JOBS ACT
 

USURY

Interest which exceeds the legal rate charged to a borrower for the use of money.

Is the practice of making unethical or immoral monetary loans that unfairly enrich the lender.

VALUATION

The process of determining the economic value of a business or company.  Often times, owners will turn to professional business valuators for an objective estimate of the business value.  The field of business valuation encompasses a wide array of fields and methods. The tools and methods can vary between valuators, businesses and industries. Common approaches to business valuation include review of financial statements, discounting cash flow models, and similar company comparisons. 

VENTURE CAPITAL

Money used to support new or unusual commercial undertakings; equity, risk, or speculative capital. This funding is provided to new or existing firms that exhibit above-average growth rates, a significant potential for market expansion, and the need for additional financing for business maintenance or expansion.

WARRANTS

A derivative security that gives the holder the right to purchase securities (usually equity) from the issuer at a specific price within a certain time frame.

YOUTUBE 

YouTube is a video-sharing website on which users can upload, share, and view videos. Three former PayPal employees created YouTube in February 2005. In November 2006, YouTube, LLC was bought by Google Inc. for $1.65 billion, and is now operated as a subsidiary of Google. YouTube is the largest video-sharing site in the world and you’re probably on it now instead of working on your crowdfunding campaign. :)

The information in this Glossary is for general, educational purposes only and should not be taken as specific legal  or accounting advice.