Business Loan Glossary: Key Terms Every Small & Medium-Sized Business Should Know
Navigating the world of business loans can be complex, especially for small and medium-sized businesses. Our comprehensive business loan glossary is here to help. Whether you're applying for a loan or managing finances, understanding key terms is crucial to making informed decisions. Explore definitions, explanations, and expert insights to simplify your business loan journey and empower your financial growth.
What is a Subsidiary?
A Subsidiary is like a branch of a larger tree, where a company is owned or controlled by another company, known as the holding company.
A Subsidiary is like a branch of a larger tree, where a company is owned or controlled by another company, known as the holding company. Specifically, it's a company where the majority of the voting stock is owned by the holding company.
Think of it as a family tree of businesses. The holding company sits at the top, overseeing and controlling its subsidiaries, which operate as separate entities but are ultimately under the umbrella of the holding company's ownership.
At its core, a subsidiary represents a strategic expansion or diversification for the holding company. It allows the holding company to extend its reach into new markets, industries, or geographic regions while maintaining control over the subsidiary's operations.
For the Small Business Administration (SBA), subsidiaries are considered affiliates, meaning they are owned or controlled by the applicant business. This affiliation is important for SBA purposes, as it may impact eligibility criteria and loan application processes.
By owning subsidiaries, businesses can leverage synergies, share resources, and achieve economies of scale. It's like building a network of interconnected businesses, each contributing to the overall success and growth of the holding company.