Alternative Finance Terminology A-Z – Part 4 (S-Z)


 “Money is better than poverty, if only for financial reasons.” – Woody Allen

Welcome to Part 4 of our guide to Alternative Finance Terminology (see also Part 1, Part 2 and Part 3).



In the world of Alternative Finance, security generally refers to collateral on a loan, which a lender can use to minimize risk when investing. Collateral can be in the form of property or any other asset over which a borrower has possession. If a borrower fails to repay a loan, the lender can seize the asset to compensate for any lost principal and/or interest. Such loans, termed “secured loans,” are considered less risky than “unsecured loans,” as the latter offers less assurance that investor money will be returned one way or another. A security can also refer to a financial asset or financial instrument that can be traded. They can include debt securities such as banknotes, bonds and debentures, or equity securities such as common stocks. One of the main ways for publicly-traded companies to source revenue for new operations is to sell securities to investors.

Self-invested Personal Pension (SIPP)

A SIPP is a kind of DIY pension, similar to a personal pension, with the key difference being that savers have more flexibility and control over where their money is invested. Unlike traditional personal pensions, where investment choices are typically limited and run by the pension company’s own fund managers, SIPPs enable investors to choose from a wider pool of investment opportunities, the breadth of which is determined by the SIPP provider.

Small and medium-sized Enterprise (SME)

SMEs are businesses with fewer than 250 employees and a turnover of less than £50 million. There are three main types of SMEs: micro-businesses (0-9 employees), small businesses (10-49 employees), and medium-sized businesses (50-249 employees). In 2016, SMEs made up 99% of businesses in the UK.

Special Purpose Vehicle (SPV)

A special purpose vehicle (SPV) is a legal entity that is created solely for a particular financial transaction or to fulfil specific objectives. Forming an SPV is a common approach when a company is seeking financing because it separates the assets, liabilities, and legals of the relevant portion of that company, working to simplify the specifics of any deal. It allows a company to get financing for a particular purpose without increasing the debt burden of the firm as a whole. An SPV is also useful and appropriate for transactions involving multiple investors and providers, as it eliminates the need for each party concerned to contract individually with one another.


Subordination refers to the designation of one loan as lower priority than another loan with respect to the earnings or assets of a company. Subordination agreements are often drawn up to specify the order in which debts are to be repaid, effectively making some claims in a contract senior to others. In the event that repayment becomes an issue – such as bankruptcy – the subordinate loans would take a backseat to the original loan, and indeed may not be paid at all.

“Always borrow money from a pessimist, he doesn’t expect to be paid back.” – Author Unknown


Syndication is a lending process that brings together a group of lenders who each cover different portions of a single loan. It is particularly useful where the amount being borrowed is either too large or represents too much of a risk for a single lender. Generally, syndicated loans are structured, arranged, administered, and managed by a financial institution, known as the “lead arranger” or “syndicate agent”. Some alternative finance firms take on this role as a lead arranger, particularly in Sophisticated Investor to Business lending.



A valuation is an assessment of the present value of an asset. Valuations have numerous applications within the financial sector such as determining the value of collateral for a loan, as well as investment analysis, capital budgeting and financial reporting.

Venture Debt

Also known as venture lending or venture leasing, this is a debt financing mechanism for venture-backed companies to borrow money for working capital or capital costs such as the purchasing of equipment. It is particularly useful for start-up companies that are lacking in positive cash flow or significant assets that can act as security on a loan. The lenders tend to be alternative investors or specialised banks.


Wealth Management

Wealth management describes a professional service for individuals that combines accounting and tax services, investment advice, estate planning, retirement planning and other financial services for a set fee. A contributor to a Forbes article puts it thusly: “Wealth management is very straightforward. From the affluent individual’s perspective, wealth management is simply the science of solving/enhancing his or her financial situation. From the financial advisor’s perspective, wealth management is the ability of an advisor or advisory team to deliver a full range of financial services and products to an affluent client in a consultative way.”

Working Capital

The money available to a company for day-to-day trading and operations, calculated as current assets minus current liabilities. Working capital is a common measure of a company’s efficiency, liquidity and overall health. Positive working capital indicates that a company is in a position where it is able to pay off its short term liabilities. Negative working capital, by contrast, indicates the opposite.

“No matter how hard you hug your money, it never hugs back.” – Quoted in P.S. I Love You, compiled by H. Jackson Brown, Jr.

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