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5.  Leverage

Leverage can be interpreted a couple of different ways. In the financial world, leverage is most commonly known as the amount of debt that can be used to finance your business' assets. In simple terms, the amount of money you borrowed to run your business. You really want to strike a balance between debt and equity. If you have way more debt than equity, you will be considered "highly leveraged" aka "very risky" to potential investors.

6.  Capital Expenditures

Capital expenditures are any items purchased by your business that create future benefits. Basically, if something you bought is going to be useful to your business beyond the year in which you purchased it, capitalize the item as an asset for you accounting records and recognize a portion of the expense (called depreciation or amortization) over the useful like of the capital expenditure. Examples include buildings, equipment, computers, etc.

7.  Concentration

Concentration is usually expressed as a percentage of how much your business is doing with a particular business, client or in a particular area. If your business is concentrated on only one target market and something goes wrong with those limited relationships or areas, the effect on your business could be devastating.

Learn these basic concepts and know them off the top of your head and you will be in a much better position to converse with those interested in knowing about your business!

Related article:
4 Basic Principles of Raising Capital

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About the author

Holly Perlowitz

Holly Perlowitz, CPA, serves as Business Development Manager for Community Capital New York. An experienced financial services professional with expertise in lending, operations, compliance and accounting/finance, Holly began her career in public accounting with Deloitte, followed by Chase and then Emigrant Bank, where she held a senior management role at Emigrant Mortgage Company. 
She holds a Bachelor’s Degree in Accounting from St. Thomas Aquinas College and an MBA from Fairleigh Dickinson University and has served on the Board of Family Services of Westchester, the Advisory Board of the Center for Financial Education and chairs a committee for the Relay for Life Event in Ossining.

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