Business finance glossary

Affordability

A lender's view of whether your business can comfortably meet repayments from its income, usually checked against bank statements and accounts.

Amortising loan

A loan where each regular payment covers interest and part of the amount borrowed, so the balance falls to zero by the end of the term.

APR

Annual percentage rate — the yearly cost of borrowing including interest and certain fees, used to compare credit products.

Asset finance

Funding to buy or lease equipment, vehicles or machinery, where the asset itself usually secures the finance. Learn more

Balloon payment

A larger final payment at the end of a finance agreement, which lowers the regular payments before it.

Bridging loan

Short-term finance secured on property, often used to complete a purchase quickly until longer-term funding or a sale is arranged. Learn more

Broker

A firm that introduces borrowers to lenders. Lending Box is a credit broker, not a lender, and is usually paid commission by the lender.

CCJ (county court judgment)

A court order to repay a debt in England and Wales. Unsatisfied or recent CCJs can affect how lenders view an application.

Charge

A legal right a lender registers over a company's assets as security, recorded at Companies House.

Commercial mortgage

A long-term loan secured on business or investment property. Learn more

Covenant

A condition in a finance agreement, such as keeping certain financial ratios, that the borrower agrees to meet.

Credit limit

The maximum amount you can draw on a facility such as a credit card or revolving credit line.

Debenture

A form of security giving a lender a charge over a company's assets, often both fixed and floating.

Default

Failing to keep to the terms of a credit agreement, such as missing repayments. Defaults are recorded on credit files.

Development finance

Funding for building or major refurbishment projects, usually released in stages as work progresses. Learn more

Factor rate

A fixed multiplier used by some revenue-based finance to set the total to repay, for example 1.2 times the amount advanced.

Factoring

A type of invoice finance where the provider also manages collection of payments from your customers. Learn more

Facility

An agreed arrangement under which a lender makes funds available, such as a loan, overdraft or invoice finance line.

Hire purchase (HP)

Asset finance where you pay for an asset in instalments and own it once the final payment is made.

Interest retained

On bridging loans, interest for the term is deducted from the loan at the start instead of being paid monthly.

Invoice discounting

Invoice finance where you keep control of collecting payments from customers; the arrangement is often confidential.

Invoice finance

Borrowing against unpaid invoices so you get cash before customers pay. Learn more

Leasing

Paying to use an asset for a set period without owning it outright at the end.

LTV (loan to value)

The loan amount as a percentage of the value of the property or asset securing it.

Merchant cash advance

An advance repaid as a percentage of future card takings rather than fixed monthly payments. Learn more

Personal guarantee

A promise by a director to repay a business debt personally if the company cannot.

PSC (person with significant control)

Someone who owns or controls more than 25% of a company, recorded at Companies House.

Refinancing

Replacing existing borrowing with a new facility, often to change the cost, term or monthly payment.

Revenue-based finance

Funding repaid as a share of revenue, so repayments rise and fall with sales.

Secured loan

A loan backed by assets such as property, which the lender can claim if the loan is not repaid. Learn more

Selective invoice finance

Funding chosen invoices one at a time, without committing your whole sales ledger.

Term

The length of time over which finance is repaid.

Trade finance

Funding to pay suppliers for goods, often imports, before you sell them on. Learn more

Unsecured loan

A loan not backed by specific assets, though a personal guarantee is often still required.

Working capital

The money a business has available for day-to-day running costs — current assets minus current liabilities. Learn more

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