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Financial Terms for Veteran Small Business Owners

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Financial Terms for Veteran Small Business Owners


Financial Terms for Veteran Small Business Owners

By Debbie Gregory.

Regardless of the size of your business or how long you have been operating, Veteran Small Business Owners need to understand basic financial terms to successfully run their business   We have below a glossary of financial terms to review and understand so that you have a better grasp on your business and whether or not you are making money and when you can forecast a profit.   VAMBOA also highly recommends courses offered by the Small Business Association (SBA) in basic finances for small businesses.  All of the courses that the SBA offers are free of charge and we encourage you to take advantage of them.

Accounts Payable

Accounts payable is also called trade payable. It refers to the total invoices for goods and services a business has received, but has yet to pay. They’re usually due for payment within 15 to 45 days. In short, this is money your business owes to other businesses.

Accounts Receivable

Accounts receivable is the amount of money a company has claim to or has invoiced. It is from having sold goods or rendered services to its customers. This is what other businesses or customers owe your business.

Accrued Expenses

Accrued expenses are expenses that a business has incurred but has yet to pay. This is because either the invoices have not yet been received or the payments aren’t yet due.

Examples of accrued expenses include interest on loans and taxes incurred. Salaries your employees earn up to the period of reporting, but aren’t due for payment until after the report is prepared, are also accrued expenses.


An asset is any item your business owns that is of fiscal value and is expected to benefit the business in the future.

Balance Sheet

Your balance sheet gives an overview of the financial situation of your company. Unlike an income statement, a balance sheet offers a snapshot of a business’s finances at a specific time.

A balance sheet consists of three segments:

  • “Assets”
  • “Liabilities”
  • “Owner’s Equity”

These three segments must balance out in a simple equation. Assets = Liabilities + Owner’s Equity. Hence, the name balance sheet.

Cash and Cash Equivalents

Cash and cash equivalents are assets and items that a business can easily convert into cash. Cash equivalents could include checks, certificates of deposit, and treasury bills. If your business doesn’t have cash equivalents, it would only report its cash-at-hand and in the bank.

Cash Flow

Cash flow refers to the reconciliation of cash moving into and out of a business. When a business receives more cash than it sends out, it is cash flow positive. A business is cash flow negative when it spends more than it receives.

Cost of Goods Sold or Cost of Revenue

Cost of goods sold refers to the full cost for the production of the goods a business sells.

Equity Stake

Equity stake is the part of a company owned by an entity. It is usually expressed as a percentage. In a true sole proprietorship, the owner of the business owns a 100% equity stake.


A franchise is a license. It grants the franchisee access to the franchisor’s trademark and operation guidelines. The franchisor is the entity that owns the trademark. A franchisor is usually an accomplished and well-known company. It uses licensing agreements to expand without spending the capital (money) required.

Gross Profit

Gross profit is the cost of goods sold or cost of revenue subtracted from net sales. This excludes operating expenses that do not directly generate revenue. This includes costs such as accounting, supplies, and advertising. It is the first determinant of how profitable a company is. It indicates the financial viability of the products and services the company offers.

Let’s say your detergent manufacturing business sells $50,000 worth of detergent in a year. The raw materials, transportation, production facility rental, and factory labor cost $30,000. Your gross profit would be $20,000.

Gross Profit Margin

Gross profit margin refers to the ratio of the revenue that you keep as gross profit. It is also called gross margin or gross profit percentage.

The formula to calculate this is (Gross Profit/Net Sales) x 100.

A detergent business whose gross profit is $20,000 with net sales of $50,000 has a gross profit margin of 40%. This means the detergent sold returned 40% on the capital that’s directly associated with the detergent production.

Gross Sales

Gross sales include the total of all sales activity during a reported period. It excludes sales deductions such as sales discounts, sales returns, and sales allowances. Gross sales figures track how effective sales efforts are, assuming there were no deductions. When you deduct these items, what you have left is net sales or revenue.

Income Statement

Your income statement is also called a profit and loss statement, earnings statement, or statement of operations. An income statement shows all the money your business makes, its expenses, and its profit. The typical frequency for income statements is both quarterly and annually.

If your business is struggling to make a profit, the income statement is the first place you need to look. It will show you if — and where — there’s room for reducing expenses to improve profitability. It can also show if the only way to improve profitability is to make more money.


A liability refers to anything a business owes. This includes loans, mortgages, and advance payment for goods and services not yet delivered or rendered. Liabilities are reported on balance sheets as short-term (current) and long-term liabilities. Current liabilities are typically debts or obligations that are due within a year. This includes short-term loans, interest, and taxes. Long-term liabilities are due over a longer period.

Net Income

Net income is gross profit minus every expense incurred during the reported period. You get this by subtracting the cost of goods, services, and operating and non-operating expenses from your net sales or total revenue. Non-operating expenses include interest, depreciation, taxes, and advertising.

It is the overall determinant of how profitable a business is. Here’s an example. If your gross profit is $20,000, and you spent $10,000 on operating and non-operating items, your net income would be $10,000. This means your business made a profit of $10,000 after you deduct all production, service, and operational expenses for that reporting period.

Non-Operating Expenses and Loss

Non-operating expenses are costs incurred due to activities unrelated to a business’s core operation. These activities don’t have tangible effects on operating results. This includes, but is not limited to, interest and insurance.

Non-operating loss is loss incurred due to activities that don’t relate to business operations. A good example would be a loss incurred as a result of a lawsuit settlement.

Non-Operating Revenue and Income

Non-operating revenue and income is the total profit created by a business from activities that aren’t tied to its core operations. Examples would include proceeds from selling business equipment. It can also include profit made from sales due to foreign exchange.

Notes Payable and Notes Receivable

Notes payable are IOUs. These could be funds borrowed from a bank or an amount owed to a supplier for raw materials delivered. Notes payable are a debt instrument. They are recorded as a current liability on a balance sheet if due within 12 months. If they are due over a longer term, they are considered long-term liability.

Notes receivable is the opposite of notes payable. What one company records as notes payable, another company records as notes receivable. Notes receivable appear as a current asset on a balance sheet if expected within 12 months. Anything more than that is considered a long-term asset.

Operating Expenses

Operating expenses are the costs tied to a business’s core operations. These costs can be classified into two categories. The first category is cost of goods sold (or cost of revenue) and selling. The second category is general and administrative expenses (SG&A).

Owner’s Equity

Owner’s equity is the totality of the owner’s investment into the business. This is the portion of assets that belongs to the business owner.

Operating Income

Operating income is the revenue or net sales that’s left after you deduct operating costs. It is also called operating profit or earnings before interest and taxes (EBIT). Its calculation excludes non-operating expenses like interests, taxes, lawsuit settlement expenses, etc.

Operating Margin

Operating margin is the ratio of revenue or net sales a business keeps as operating income. It is calculated by dividing operating income by revenue or net sales. The result is then presented as a percentage by multiplying by 100.

As an example, a business’s operating income was $10,000 on a $50,000 revenue or net sales. Its operating margin is then $10,000/$50,000 = 0.2 x 100 = 20%.

Operating margin helps determine how efficient a company’s day-to-day operations are. In the example above, the business’s day-to-day operation made $0.20 for each dollar of revenue.

Prepaid Expenses

Prepaid expenses are advance payment for future expenses. Prepaid expenses usually appear on a balance sheet in the current asset’s subsection. This is because they’re usually due within 12 months. Prepaid expenses usually arise when businesses pay in advance for goods and services needed in the near term.

Insurance is one example of prepaid expense. For example, your business buys an insurance policy of $2,400 over a 12-month period. Your prepaid expenses account will be credited with $2,400 at the beginning of the period. Accountants would divide this by 12 to say you’re paying $200 per month. So, as each month passes, you’d have used $200 out of your prepaid insurance expense. The $200 expensed for a given month will show up in your non-operating expenses column for that month. It will be debiting from your prepaid expenses account.

The same accounting process goes for any type of prepaid expense. You can account for rent, supplies, and legal and contract expenses in this way.


Revenue is the total amount of money a company brings in from its business activities after discounts, returned goods, and other sales allowances have been deducted. Businesses that sell goods, such as retailers, are more likely to refer to revenue as net sales. It is also called top-line because it usually appears at the top of an income statement.

 Selling, General, and Administrative Expenses (SG&A)

Selling, general, and administrative expenses are expenses you incur while selling your products and services. They also include the cost of running your business on a daily basis. Below is a breakdown:

  • Selling expenses include the cost to sell the goods you’ve already produced or purchased. This excludes cost of production or purchase. It includes: expenses related to sales material, traveling, advertising, delivery, warehousing, telephone bills, salaries of sales employees, and sales commission.
  • General and Administrative expenses are usually more fixed than selling expenses. They include expenses related to rent, mortgage, insurance, utilities, and salaries of non-production and non-sales employees.

Unearned Revenue

Unearned revenue refers to advance payments a business receives from its customers. It is also called deferred or prepaid revenue. So long as the goods or services for which the payment was made are yet to be delivered, that amount of money remains an unearned revenue. Since it indicates that a business owes its customers, unearned revenue appears as a current liability on balance sheets. Typically, what one entity records as unearned revenue, another entity records as prepaid expenses.

Various businesses incur unearned revenue differently. For example, a subscription service company that bills its customers yearly will have one year’s worth of deferred revenue. As each month passes, a portion of the subscription fee proportional to a month’s service will be deducted to reflect the worth of subscription service left undelivered. Deductions from the deferred revenue account are credited as revenue in the income statement.

Managing your finances is one of the most important parts of running a business. Unfortunately, small business owners who have little financial background shy away from these responsibilities. By learning these key financial terms, you’ll be more able to understand your financial statements, communicate with finance professionals, and monitor your business’s cash flow.

Veteran and Military Business Owners Association, VAMBOA,



Crowdfunding For Entrepreneurs

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Crowdfunding For Entrepreneurs

By Debbie Gregory.

Crowdfunding enables entrepreneurs to tap into the power of the Internet to raise money for their small businesses. It provides business owners a relatively inexpensive way to bankroll a young business or new product idea.  Additionally, Crowdfunding helps promote businesses and products on social media while building a base of enthusiastic customers.

Crowdfunding is when a “crowd” funds a project as opposed to having one or two major investors. Having a unique product that fills a consumer void and a strong personal or business story that compels investors to provide funding to have an opportunity for success.

Crowding works with the company selecting a crowdfunding platform, and backers pledging an amount to the fund, usually in return for a reward for their contribution. Donors receive a product or service related to the project, with the value depending on the amount donated. For instance, a $5 donation might be rewarded with a handwritten thank you card, while $50 or $100 might bring early access to the company’s product or service.

Many crowdfunding websites exist, each with its own fees and rules for use.   The top five Crowdfunding websites are Kickstarter, GoFundMe, LendingClub, Indiegogo and Prosper.

  • Kickstarter – is one of the best-known crowdfunding resources with a proven history. It is best for businesses focused on making products for consumers such as games, art, technology, music, and food. Products that are able to be shipped to campaign backers.
  • GoFundMe – doesn’t charge any fees other than the transaction fees when the funds are received. It can be challenging to get your campaign attention.
  • LendingClub – works for businesses that need quick capital and can qualify and is a fantastic debt crowdfunding option. Businesses must have been up and running for at least 12 months, have good personal credit score of at least 700 or more, with a minimum of $50,000 in annual sales.
  • Indiegogo – works best for businesses that are making consumer products that can be shipped as rewards. Companies at any stage are welcome, but most Indiegogo backers want to see that prototypes available.
  • Prosper – is best for business owners who desire a personal loan that can be used for business purposes. This is an excellent option for a startup or when a business isn’t generating enough revenue to qualify for other financing options. Keep in mind that it can place personal assets at risk.

Every crowdfunding site offers small businesses something different, with options from bigger sites that provide more exposure but a lot of competition to niche sites that have dedicated followers.

Veteran and Military Business Owners Association, VAMBOA,


More Financing Info For Small Businesses

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More Financing Info For Small Businesses

By Debbie Gregory.

Many business owners focus on the numbers on their balance sheet and don’t pay enough attention to their cash flow needs. To keep a company thriving, business owners need to take charge of their working capital.

Working capital is the daily, weekly and monthly cash requirement for the operations of a company.  It is paramount to the success of any business. Working capital ensures that a firm has enough liquidity to run its operations smoothly. Veteran business owners need to also be mindful of working capital.

Some of the additional benefits of having healthy working capital include:

  • A higher return for every dollar invested in the business
  • Improved credit profile
  • Higher liquidity and profitability
  • The ability to weather market ebbs and flows
  • Favorable Financing Terms

While there are many options to finance your small businesses, be aware that finance terms and fee structures are hidden and don’t clearly display the true cost of credit.

To that end, StreetShares, a veteran-run company, is currently providing one of most transparent and fair business lending products that benefit entrepreneurship across the U.S., according to Mark Rockefeller than CEO and an Iraq War.

Streetshares is launching zero fee products with a low, straightforward interest rate, allowing business owners to more clearly understand the real cost of credit as they are increasingly accustomed to in the consumer lending space.   These products will be available until May 31st.

Additionally, StreetShares is also providing a four-week interest rate rebate to small business owners so if borrowers choose to pay off their loan or line of credit draw within the four week period, they can do it without paying any fees or finance charges whatsoever.

“Our mission is to be the trusted financial solution for America’s heroes and their communities, this offering will help us achieve that,” said Rockefeller

Knowing how much working capital your business needs to function will vary, but it’s important to have a clear understanding, plan accordingly and manage your financial responsibilities.

Veteran and Military Business Owners Association, VAMBOA,


Veteran Owned Business Financing Methods 

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Veteran Owned Business Financing Methods

By Debbie Gregory 

Are you ready to start your business? If so, you need to think about how you’re going to fund your business. There are many different ways to secure financing, so here are some suggestions. 

  • Equity Financing – is the method of raising capital by securing investors. Think Shark Tank: in return for the investment, the shareholders receive ownership interests in the company. You need to be prepared to give up part ownership of your business. Angel investors, Venture Capital firms (and Sharks) provide not only the capital you need to grow, but often their wisdom and advice can be an invaluable resource to your business. 
  • Debt Financing – is the method of funding your company through business loans. Like any loan, you’re required to pay back that debt plus interest over an agreed-upon amount of time. This method allows you to retain 100% of your company. 

Some loan options include short-term and medium-term loans, equipment financing loans, Invoice financing, SBA loans, line of credit and merchant cash advances.  Below we take a look at them in greater detail.

  • Short-Term Loans – offer smaller amounts in financing usually paid back period ranging from three to eighteen months. These are good options for less-qualified borrowers, but usually have higher interest rates. 
  • Medium-Term Loans – offer a larger amount of capital at a relatively affordable rate. 
  • Equipment Financing – can only be used to purchase new or used equipment. Equipment lenders advance up to a specific percentage of the value of the equipment.  
  • Invoice Financing – is sometimes referred to as contract financing or factoring.  This is an asset-based lending product that allows companies to finance slow-paying accounts receivables through the sale of invoices sold to a factoring company in exchange for an immediate payment. Choose wisely especially if you want to continue to do business with this customer because often these companies will not focus on customer service when collecting the amount owed. 
  • SBA Loans – are loans issued by a traditional bank, but with very low interest rates and guaranteed by the SBA.  
  • Lines of Credit – Provides access to funds that a business owner may draw from whenever they want or need the funds for their business. Interest is only paid on the funds drawn from the line of credit, and only for the time the funds are outstanding. 
  • Merchant Cash Advance – provides a lump sum of capital, that is repaid by allowing the lending company to take a fixed percentage of your daily credit or debit card sales each day until you’ve repaid in full. 

VAMBOA, the Veterans and Military Business Owners Association encourages you to carefully investigate and select the right option for your Veteran Owned Business. 

Veteran and Military Business Owners Association, VAMBOA,  




How to Build and Improve Your Credit Score

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By Debbie Gregory.

Building a solid credit history and maintaining a high credit score can have a dramatic impact on your quality of life and on your Veteran Owned Business. Not only is a high credit score essential for things such as qualifying for a loan or obtaining a credit card, but it is also important for less obvious things such as obtaining cell phone service, renting a car, and maybe even a job.

Your credit score is based on your FICO score, which ranges from 300 to 850, and is based on these factors:

  • How much money you owe
  • The regularity of your payments
  • The types of your credit
  • The length of your credit history
  • How many credit requests you’ve made.

If you’re at the top with a score between 800 and 850, you have exceptional credit and are considered to be a prime candidate eligible for the lowest interest rates. This is your reward for having a long credit history without any late payments, as well as low balances on your credit cards.

If your score is between 740 and 799, you have very good credit and are considered to be financially responsible.

If your score falls between 670 and 739, you have good credit, and are around the same range as most Americans, who have an average FICO score of 704.

A score between 300 and 579 is a poor rating. And there are those who have no credit. But don’t despair, these scores can improve.

If you need to improve your score, avoid quick-fix efforts which are most likely to backfire. Raising your scores after a poor mark on your report or building credit for the first time will take patience and discipline. If you are having trouble making ends meet, contact your creditors and explain the situation. You may be able to obtain a time extension or fees waived.

Be responsible and don’t over extend yourself, consistently pay your bills on time, and limit the amount of credit you have requested so that you can get started on the right foot or rebuild a damaged credit score.

If you need to establish credit, talk to your bank and see if they will approve you for a small loan or a low-limit credit card. You can make the payments and pay if off improving your score. Many banks that might not approve you for a credit card will do so with a savings account acting as a security deposit with their institution. You can also start with a gas or retail store credit cards too.

Veteran and Military Business Owners Association, VAMBOA,