Funding Terms and Their Definitions

Consolidation
When a company undergoes consolidation, it can have a variety of different meanings. A classic definition of consolidation is a company that is looking to be merged with another company. Some investment firms, however, define consolidation as an amalgamation.

Recapitalization
Recapitalization is the restructuring of a company’s debt and equity to make it more stable.

Restructuring
Restructuring is a step a company takes when it encounters problems. The primary reason for restructuring is when a company is in debt and needs to reorganize its finances, management and other key operations.

Seed Funding
Seed funding is the funding a company receives when it is just starting out. The seed funding round is the funding a company seeks to develop its product or service and purchase the necessary equipment and real estate to begin operations.

Later Stage
Later stage, also referred by some investment firms as either expansion or growth stage is the stage when a company seeks capital to expand its operations into new markets. During this stage, a company primarily requires bridge funding. The company is already in a mature stage.

Series A Funding
Series A funding is the first round of early stage funding. Companies seek series A funding to provide them with enough capital to operate from six months to two years.

Series B Funding
Series B funding is the second stage of early stage funding and is usually given to companies who are preparing for mezzanine funding.

Leveraged Buyout or LBO
A leveraged buyout, also known as an LBO, occurs when a company is looking for funding to acquire a smaller company and the licensing of the acquired company’s products or services.

Management Buyout or MBO
A management buyout, also known as an MBO, is the acquisition of a smaller company by a larger company. In an MBO, the company works together with the management of the company it is looking to acquire. In an MBO, the management of the acquiring company acts as the management of the acquired company.

Start-up
A start-up company is a company which is in its early stages of formation

Mezzanine Funding
Mezzanine funding is funding given to a company that is in mezzanine stage. Mezzanine stage can best be defined as the middle stage of a company’s life.

Mezzanine funding is primarily intended for companies who are preparing an initial IPO or initial public offering. An initial public offering occurs when a company prepares for public trading on the stock exchange.