Glossary

A fraction (i) the numerator of which is equal to the outstanding loan balance against a particular category of collateral and (ii) the denominator of which is the gross amount of collateral in that category.

An effective date or as of date is the date upon which something is considered to take effect, which may be a past, present or future date. This may be different from the date upon which the event occurs or is recorded.

Eligible collateral is the assets of a business that a lender considers of sufficient quality to lend against. Eligible collateral represents assets that a lender believes it could convert into cash to repay a loan in the event the owner of the asset, the borrower, went out of business.

An employee stock ownership plan (ESOP) is a qualified defined-contribution employee benefit (ERISA) plan designed to invest employee retirement contributions primarily in the stock of the sponsoring employer.

An engagement letter is a legal document that defines the engagement between the appraiser and the borrower. This letter should state the terms and conditions of the engagement, address the scope of the assignment and the terms of compensation.

The market capitalization of a company is simply its share price multiplied by the number of shares a company has outstanding. Enterprise value is calculated as the market capitalization plus debt, minority interest and preferred shares, minus total cash and cash equivalents.

Equitable subordination refers to the legal action, typically in a bankruptcy case, by which a court rearranges the lien priority position of various creditors to move a lower priority lien up in the order. Lien priority governs the order in which creditors are paid or can foreclose on assets used to secure loans made to a company.

The ownership investment/interest in a company, typically expressed through stock certificates.