Every term, A to Z
If a funder used a word you did not recognise, it is almost certainly here.
A
ACH Debit — An automatic withdrawal pulled directly from a business bank account, used by most funders to collect daily or weekly payments.
Average Daily Balance — The average amount held in a business bank account across a statement period, measured every day rather than at month end.
B
Bank Statement Loan — Funding underwritten primarily from business bank statements rather than tax returns or financial statements.
Blanket Lien — A security interest covering substantially all of a business's assets rather than one specific item.
Business Credit Score — A score assessing the creditworthiness of the business entity rather than its owner, issued by bureaus such as Dun & Bradstreet or Experian Business.
Business Line of Credit — A revolving facility a business can draw from as needed, repay, and draw from again up to a set limit.
C
Cash Flow Gap — The period between paying for work and being paid for it.
Collateral — A specific asset pledged to secure financing, which the lender can claim if the debt is not repaid.
Confession of Judgment (COJ) — A clause in some funding agreements in which the business waives the right to contest a claim in court if it defaults.
D
Daily Payments — A repayment structure that withdraws from the business bank account every business day.
Debt Service Coverage Ratio (DSCR) — A measure of whether a business generates enough income to cover its debt payments, calculated as net operating income divided by total debt service.
F
Factor Rate — A multiplier — not an interest rate — used to price a merchant cash advance. A $50,000 advance at a 1.4 factor rate means you repay $70,000 in total.
First Position — The funder with the senior claim on repayment, typically the first one to fund the business and the first to be repaid.
Funding Position — The order in which funders are repaid when a business holds more than one advance or loan.
H
Hard Credit Pull — A formal credit inquiry that is recorded on the credit report and can temporarily lower the score.
Holdback — The fixed percentage of daily or weekly card and bank deposits that a funder withholds to repay an advance, commonly 10% to 20%.
I
Invoice Factoring — Selling unpaid invoices to a third party at a discount in exchange for immediate cash.
M
MCA Buyout — When a new funder pays off an existing advance in full and replaces it with a single new facility.
Merchant Cash Advance — The purchase of a portion of a business's future revenue at a discount, repaid through a percentage of daily or weekly deposits.
N
NAICS Code — The six-digit North American Industry Classification System code identifying what a business does.
NSF (Non-Sufficient Funds) — A returned or declined transaction caused by too little money in the account.
Negative Days — Any day on which a business bank account balance falls below zero, even briefly.
Net Funding — The amount that actually reaches the business bank account after fees and any payoff of existing balances.
O
Origination Fee — A charge deducted by the funder for issuing the facility, usually a percentage of the amount funded.
P
Personal Guarantee — A commitment by the business owner to be personally responsible for the debt if the business does not repay.
Prepayment Penalty — A fee charged for repaying a facility ahead of schedule.
R
Renewal — Additional funding offered to an existing customer, usually once a set portion of the original balance has been repaid.
Restricted Industry — A business category a funder will not finance, regardless of how strong the file is.
Revenue-Based Financing — Funding repaid as an agreed percentage of ongoing revenue rather than on a fixed schedule.
Reverse Consolidation — New funding that supplies a business with capital to cover its existing advance payments, restructuring the payment schedule without formally paying off the original positions.
S
Seasonality — Predictable variation in revenue across the year that affects both funding need and repayment capacity.
Second Position — A funder that repays after the first-position funder, taking on more risk in exchange for higher pricing.
Soft Credit Pull — A credit check that does not affect the credit score and is not visible to other lenders.
Stacking — Taking a second, third or fourth advance while an earlier one is still outstanding, leaving multiple funders collecting from the same deposits at once.
T
Term Loan — A fixed sum borrowed and repaid on a set schedule over a defined period.
Time in Business — How long a business has been operating, usually measured from formation or first revenue.
Total Payback — The full amount a business will repay over the life of a facility, including all costs.
U
UCC Filing — A public notice filed by a funder recording a security interest in a business's assets.
W
Weekly Payments — A repayment structure that withdraws once per week rather than every business day.
Working Capital — The money available to cover day-to-day operating costs — the gap between current assets and current liabilities.