Finder is committed to editorial independence. While we receive compensation when you click links to partners, they do not influence our opinions or reviews. Learn how we make money.

Business loans glossary

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

Updated

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.

Definitions

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.
Go to site