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Business loans glossary

An A-to-Z list of terms to help you understand your financing options.

With a variety of business loans out there, understanding a few key terms can help you find the option that best meets your business’s needs.


Term Definition
Accounts receivable Money that a company is owed by its clients, usually in the form of outstanding invoices. This counts as an asset.
Accounts payable Money that a company owes a supplier, vendor or other source that it purchased goods or services on credit from. This counts as a liability.
Asset Anything of value that a person or business owns or buys, as well as money they are owed — like accounts receivable.
Bridge financing A high-interest short-term loan, usually with terms between two weeks and three years, that’s used to cover gaps in longer-term financing. Typically used to cover the initial costs of a project or change to a business that hasn’t yet been finalized.
Business assets Property or equipment that a business owns, including inventory, real estate, securities and accounts receivable.
Commercial and industrial (C&I) loan A short-term secured loan only available to businesses that provides either working capital or funds for a major expense like acquiring another business, maintaining property and real estate, or undertaking a new project.
Daily holdback When a creditor takes a percentage of a business’s daily sales as repayment for a cash advance.
Cash flow The amount of money going into a business, minus the amount of money going out. Positive cash flow means that you have enough money to cover your expenses. When you get into negative territory, you might need a working capital loan to keep afloat.
Debt-service coverage ratio (DSCR) Also known as debt coverage ratio, this is a business’s cash flow (usually the net operating income) divided by debt service payments (loan repayments and leases). It’s used by creditors to determine how able a business is to repay a loan — similar to a debt-to-income ratio.
Gross profit The total amount a business made, minus the cost of producing goods or delivering a service.
Lien A form of collateral, this is a legal agreement that allows a creditor to take certain assets if the borrower is unable to repay a loan.
Microloan A small loan — typically less than $35,000 — that can help cover small expenses when a business is getting off the ground.
Net income The difference between how much a business makes and how much it costs to run.
Net operating income The difference between a business’s profits and its expenses, taxes and interest.
Payback period The estimated amount of time it will take for a business to repay a cash advance — similar to a loan term.
Personal guarantee A promise to repay a loan with your personal assets if your business is unable to.
Split withholding When a credit card processor automatically sends a portion of a sale to a creditor and another portion to a business.
Working capital Money used to cover the cost of a business’s day-to-day operations.

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