Startup Finance Glossary
5 terms defined clearly — no jargon, no vagueness. Every definition is written for founders, not bankers.
Bootstrapping
Bootstrapping means funding your startup entirely from personal savings, revenue, or sweat equity — no external investors, no bank loans. The founder retains 100% ownership but takes on all financial risk personally.
Collateral
Collateral is an asset pledged to a lender that the lender can seize if you default on a loan. For startup loans, collateral is typically the founder's personal assets — home equity, personal savings, or business equipment — because the business itself has no significant assets to pledge.
Debt-to-Equity Ratio
The debt-to-equity ratio measures how much of a business is financed by debt versus owner equity. A high ratio signals financial risk to lenders. For startups, this ratio is often meaningless because equity is near-zero — which is why personal credit score matters more.
MRR (Monthly Recurring Revenue)
MRR is Monthly Recurring Revenue — the predictable, contracted revenue your business earns each month from subscriptions or retainer agreements. Lenders weight MRR more heavily than one-time sales because it is forward-looking income.
Runway
Runway is how many months your business can operate before running out of cash at the current burn rate. It is the single most important number for a pre-revenue or early-stage startup to know before applying for a loan.