Business funding glossary

Annual percentage rate. The yearly cost of borrowing including interest and most fees, expressed as a percentage. The only fair way to compare products with different structures.

A flat multiplier (such as 1.3) applied to the amount borrowed to get total repayment. Used by merchant cash advances and some short-term loans. It ignores time, so convert it to APR before comparing.

A credit limit you can draw against repeatedly, paying interest only on the outstanding balance. Revolving lines replenish as you repay.

A lump sum repaid in fixed installments over a set period.

A loan made by a bank or approved lender and partly guaranteed by the U.S. Small Business Administration, which allows lower rates and longer terms.

A purchase of future sales at a discount, repaid through daily or weekly debits or a percentage of card receipts. Fast, easy to get, and the most expensive form of business capital.

Selling unpaid B2B invoices to a factor at a discount for immediate cash. Approval depends on your customers' credit.

A loan or lease secured by the equipment being purchased. Easier to qualify for than unsecured credit because the asset is collateral.

A percentage of the loan deducted at funding. It raises the effective APR because you repay money you never received.

A fee charged each time you draw on a line of credit, typically 1% to 2% of the draw.

The owner's promise to repay business debt personally if the business cannot. Standard on nearly all small business credit.

A public filing that gives a lender a claim on business assets as collateral. Online lenders typically file a blanket UCC lien.

Months since the business began operating, usually measured from first revenue or entity formation. A primary screening criterion for lenders.

Dun & Bradstreet's business payment score from 1 to 100. Paying early, not just on time, is required for the top scores.

A free nine-digit identifier from Dun & Bradstreet used to track a business's credit file.

Vendor credit that lets a business pay an invoice within 30 days. When the vendor reports, it builds business credit.

Community Development Financial Institution. A certified lender, often nonprofit, that serves underserved borrowers at near-bank pricing.

The benchmark rate banks charge their most creditworthy customers. SBA and many bank loan rates are set as prime plus a margin.

The schedule by which a loan's payments are split between interest and principal over its term.

A soft credit inquiry does not affect your score and is used for prequalification. A hard inquiry is recorded and can lower your score slightly.