Business Lending Glossary

Money your business owes to suppliers and vendors for goods or services already received. Accounts payable sits on the balance sheet as a current liability and directly affects working capital. Lenders look at how fast you pay: stretching payables past terms preserves cash short term, but vendors notice, and a payables balance that keeps growing while revenue stays flat signals trouble.

Money customers owe your business for work already delivered and invoiced. Receivables are an asset, and for many businesses they are the largest one. They are also the collateral behind invoice factoring and accounts receivable financing, where lenders typically advance 70% to 90% of face value. The older a receivable gets, the less a lender will advance against it.

The umbrella term for any funding that turns unpaid customer invoices into cash before those customers pay. It covers both factoring, where you sell the invoice outright, and invoice financing, where you borrow against it and keep collecting yourself. Advance rates typically run 70%–90% of invoice face value. It works best for businesses selling to other businesses on 30, 60, or 90 day terms, where the cash gap is structural rather than a sign of trouble.

Recording revenue when it is earned and expenses when they are incurred, regardless of when cash actually moves. A December invoice counts as December revenue even if the customer pays in February. Accrual books give a truer picture of profitability, which is why banks and SBA lenders prefer them. The catch: an accrual profit and loss statement can show strong income while the bank account is empty.

Automated Clearing House, the electronic network banks use to move money between accounts in the United States. Most business loan payments run through ACH: the lender debits your operating account on a set schedule, daily, weekly, or monthly. ACH is also how funders judge repayment ability, since a returned or bounced payment shows up immediately. Multiple ACH rejections in your bank statements will sink an application faster than almost anything else.

The percentage of an invoice or asset value a lender fronts you upfront, with the rest held back or unfunded. Invoice factoring advance rates typically run 70% to 90% of face value, so a $100,000 invoice at 85% puts $85,000 in your account now. The remainder comes back to you after your customer pays, minus the factor's fee. Lower advance rates usually signal the funder sees more collection risk in your customer base.

A written explanation a lender must send when it denies credit, and it has to state the specific reasons for the decision. The Equal Credit Opportunity Act requires it, so a decline is never supposed to be a black box. Read it closely: the listed reasons tell you exactly what to fix before you apply again. If a credit report was used, the notice also names the bureau and your score.

A breakdown of unpaid invoices sorted by how long they have been outstanding, usually in buckets of current, 30, 60, 90, and 120-plus days. Factoring companies and accounts receivable lenders ask for one on nearly every deal. A report weighted toward the 90-day column tells a lender that either your customers are slow payers or your collections process is not working. Both reduce what you can borrow.

Any funder outside the traditional bank and credit union system, including online term lenders, revenue-based funders, factoring companies, equipment lessors, and merchant cash advance providers. Alternative lenders trade higher pricing for speed and looser credit requirements, often approving scores from the low 600s down into the 500s. Term products run roughly 15% to 45% APR, with advances well above that. The category is broad, so compare inside it before comparing it to a bank.

The process of paying off a loan through regular payments that cover both interest and principal, so the balance reaches zero by the end of the term. Early payments are weighted heavily toward interest, which is why paying off a five-year loan in year two saves less than most owners expect. Fully amortizing loans leave nothing owed at maturity, unlike loans with a balloon.

A table showing every scheduled payment across the life of a loan, splitting each one into interest, principal, and remaining balance. Ask for it before you sign, not after. It shows you the total interest in dollars, how quickly you build equity in a financed asset, and whether a balloon payment is waiting at the end. Any lender that will not produce one is telling you something.

A flat charge billed once a year simply to keep a credit facility open, regardless of whether you use it. Business credit cards and lines of credit are the usual carriers. On a small line, an annual fee can add a full percentage point or more to your real cost, so fold it into your Annual Percentage Rate math rather than treating it as a rounding error.

The total annualized cost of borrowing, expressed as one percentage that includes interest plus most required fees. APR exists so you can compare a bank loan against an online loan against a line of credit on the same scale. Bank term loans currently run roughly 8% to 13%, online term loans 15% to 45%, and lines of credit 10% to 60%. Merchant cash advances are not quoted in APR at all, which is precisely the problem.

An independent valuation of an asset by a licensed third party, ordered by the lender to confirm what the collateral is actually worth. Commercial real estate appraisals typically run $2,000 to $5,000 and take two to four weeks, and the borrower usually pays. Equipment appraisals are faster and cheaper. If the appraisal comes in below the purchase price, the lender sizes the loan off the appraised value, not the price you agreed to.

The charter document filed with a state to legally create a corporation, listing the entity name, registered agent, and share structure. Limited liability companies file articles of organization instead, and underwriting treats the two the same way. Lenders request a stamped copy to confirm the entity exists and to check the formation date, since time in business is measured from it.

A loan sized by the value of your collateral rather than your profitability. Lenders build a borrowing base from receivables, inventory, equipment, and sometimes real estate, then advance a percentage of each: often 80%–85% on receivables and 50% or less on inventory. Expect regular collateral reporting and periodic field audits. It suits asset-heavy companies with thin or uneven earnings, and it gives you access to more capital than a cash-flow lender would offer.

A legal transfer of the right to receive payment on a contract from the business to its lender. It is most common with federal government contracts, where the Assignment of Claims Act allows a contractor to direct payments to a financing bank. The agency then pays the lender directly rather than the business. Factors and accounts receivable lenders use the same structure with commercial customers through a notice of assignment.

The average amount of money sitting in your business bank account across a statement period, calculated by summing each day's ending balance and dividing by the number of days. Revenue-based underwriters lean on this number hard because it shows whether you can absorb a daily or weekly payment. A business doing $80K a month with a $900 average balance looks very different from one holding $12K.

A snapshot of what a business owns, owes, and is worth on one specific date. Assets minus liabilities equals owner equity, and that equation always balances. Lenders read it for working capital, for existing debt they may not have known about, and for whether the owner has been pulling money out. Most underwriters want one dated within the last 60 to 90 days.

A single large payment of remaining principal due at the end of a loan whose regular payments never fully amortized the balance. Common in commercial real estate and some equipment deals, where a loan amortizes on a 20-year schedule but matures in five. The payments look affordable until the balloon lands. Start arranging your refinance 9 to 12 months before maturity, not 30 days.

The line-by-line read of your last three to six months of business bank statements that most non-bank underwriters treat as the real application. They are counting deposits, average daily balance, negative days, non-sufficient funds hits, and any payments going out to other lenders. Statements are harder to dress up than a tax return, which is why they carry so much weight. Send full PDFs from the bank, not screenshots.

The step where a lender confirms your business bank account is real and reviews the cash flow moving through it. Most lenders now use a read-only connection to your bank instead of PDF statements, which cuts days off underwriting. They are looking at average daily balance, deposit consistency, and negative days. Three or more overdrafts in a single month will sink most applications.

A federal court process that discharges or restructures debt you cannot repay, and it stays on a personal credit report for seven to ten years depending on chapter. Most lenders want it discharged, not open, and many want two to four years of clean history since discharge. An open bankruptcy is a hard stop almost everywhere, including SBA. A discharged Chapter 7 from six years ago with clean payment history since is very workable.

One hundredth of a percentage point, used when lenders need precision. One hundred basis points equals 1%, so "Prime plus 250 basis points" means Prime plus 2.5%. At the 7.00% Prime Rate (October 2026), that lands you at 9.5%. Bankers use the shorthand constantly; there is nothing sophisticated about it, and knowing the conversion keeps a rate conversation from feeling like a foreign language.

A filing that covers every asset the business owns rather than one named piece of equipment or a specific receivable. Lenders favor it because it is simple and comprehensive. Borrowers should be careful, because it ties up assets that had nothing to do with the loan and makes adding a second lender much harder later. It is always worth asking whether the lender will accept specific collateral instead.

The level of sales at which total revenue exactly covers total costs, leaving zero profit and zero loss. Calculate it by dividing fixed costs by your gross margin percentage: $40,000 in monthly fixed costs at a 50% margin means you need $80,000 in monthly sales. Knowing this number tells you whether a loan payment is survivable, because every new fixed payment raises the break-even bar.

Short-term financing that covers a gap between one funding event and the next. A common case: you are buying a building before your permanent mortgage closes, or waiting on an SBA approval that will take 60 days. Terms usually run 3–24 months with interest-only payments and a balloon at the end. Pricing sits well above conventional debt because the lender is taking timing risk, so confirm your exit is real before you sign.

An intermediary who takes one borrower profile to many lenders and negotiates on the borrower's behalf, rather than lending money directly. Brokers are paid a commission by the lender that funds the deal, so a legitimate broker costs the borrower nothing. Quordx works this way: one application of about 10 minutes, then routing to the 3 to 7 lenders in its network that best fit your profile. Be wary of anyone charging an upfront broker fee.

A charge some brokers add to a deal in exchange for arranging your financing, often 1% to 5% of the funded amount and frequently deducted straight from your proceeds. It is legal and disclosed in the contract, but it is easy to miss if you are only reading the rate. Ask any broker how they get paid before you send documents. Quordx is free to borrowers and charges no broker fee; the lender pays the commission.

How much cash your business consumes per month beyond what it brings in. Gross burn is total monthly spend; net burn is spend minus revenue, and net burn is the number that matters. A company with $150,000 in the bank and $25,000 in monthly net burn has six months before the account is empty. Lenders reviewing a growth-stage business will calculate this from your bank statements whether you volunteer it or not.

Financing used to buy an existing business, a partner's stake, or a competitor. SBA 7(a) is the workhorse here, often funding up to $5 million with 10 year terms and rates around 9%–11.5% today. Lenders underwrite the target company's historical cash flow, not just yours, and they will want a business valuation plus three years of the seller's tax returns. Most deals require 10% down, and part of that can sometimes be seller financing.

A deposit account held in the legal name of the business rather than the owner. Nearly every lender requires one, and funds are deposited there instead of into a personal account. Commingling business and personal money is the single most common reason a healthy-looking business gets declined, because underwriters cannot separate real revenue from transfers. Open one well before you apply.

A revolving credit account tied to your business rather than your personal finances, though most issuers still require a personal guarantee. Limits commonly run $5K–$50K for small businesses, higher with strong revenue. Cards are the cheapest option if you pay in full monthly and one of the most expensive if you do not, with carried balances typically in the 20%+ APR range. They are useful for building business credit history and separating expenses cleanly.

A score measuring how your business entity, not you personally, pays its obligations. The major ones use different scales: Dun & Bradstreet PAYDEX runs 0–100, Experian Intelliscore runs 1–100, and Equifax business scores run their own range. Most small businesses have thin or empty business credit files because vendors never reported them, which is why lenders still fall back on the owner's personal score in nearly every deal under $500K.

State or local authorization to legally operate in a given jurisdiction or trade. Requirements vary widely: a contractor, restaurant, or clinic may hold several, while a consulting firm may need none. Lenders check that yours is active and unexpired, especially in regulated industries. An expired license discovered mid-underwriting stalls a file until the renewal clears, which takes weeks in some cities.

A pre-approved pool of funds you can draw from, repay, and draw again, paying interest only on what is outstanding. This is the borrower-facing product most owners want: flexible, reusable, and quick to tap when a payroll or inventory need hits. Pricing spans a wide range, roughly 10%–60% APR depending on lender tier, with banks at the low end and online lenders at the high end. Watch for draw fees, maintenance fees, and annual renewal requirements.

A written document laying out what the business does, who it sells to, and how it will generate enough cash to repay the loan. Conventional lenders looking at an operating company with two years of revenue rarely ask for one. It matters for SBA loans, startups, acquisitions, and expansion projects, where the financial projections carry far more weight with underwriters than the narrative does.

The filed federal return for the entity: Form 1120 for a C corporation, 1120-S for an S corporation, 1065 for a partnership, or Schedule C inside a personal return for a sole proprietor. Lenders usually want the two most recent years. Be aware that aggressive write-offs lower taxable income, which lowers the income a lender is able to credit you for.

A lump sum borrowed up front and repaid in fixed installments over a set period, usually 1–10 years. The structure is simple and predictable, which makes it the right tool for a one-time investment with a clear payback: a build-out, a hire, an acquisition. Banks price strong credit around 8%–13%, while online lenders run roughly 15%–45% APR in exchange for faster approvals and lower credit floors, often from about 600.

The rate or factor a lender quotes to a broker, before the broker adds any markup. What you see on the term sheet is the sell rate, and the gap between the two is the broker's margin. That markup is standard practice across the industry and rarely volunteered. It is fair to ask a broker what the buy rate was. Quordx is paid a commission by the lender rather than by marking up your rate.

Money spent acquiring or upgrading long-lived assets such as equipment, vehicles, buildings, or major software systems. CapEx hits the balance sheet and is written off over years through depreciation instead of being expensed all at once. Because these purchases are large and lumpy, they are the most common reason a profitable business needs financing. Equipment financing exists specifically for this, generally in the 7% to 20% range.

Recording revenue when cash arrives and expenses when cash leaves, ignoring invoices outstanding in either direction. Most small businesses start here because it is simple and it matches the bank account. It also understates a growing business, since work you have delivered but not yet collected on does not appear anywhere. Lenders reviewing cash-basis books will lean harder on bank statements to fill the gap.

The actual movement of money in and out of your business over a period of time. Cash flow is not profit: a business can post strong profit on paper and still miss payroll because customers pay in 60 days while vendors want 30. Underwriters care more about cash flow than almost any other measure, because loan payments come out of cash, not out of net income.

A financial statement that tracks every dollar entering and leaving the business across three sections: operating activities, investing activities, and financing activities. It reconciles net income to the actual change in your bank balance, which is why lenders use it to catch businesses that look profitable but are quietly draining cash. Operating cash flow is the section underwriters read first.

Liquid cash a business holds back for emergencies, slow months, or opportunities, rather than deploying into operations. Three to six months of operating expenses is the common benchmark, though seasonal businesses often need more. Reserves matter in underwriting because they prove you can make payments through a bad quarter. A borrower with thin reserves and strong revenue will often get a smaller offer than the revenue alone would suggest.

Informal shorthand for how much cash you actually keep per dollar of face value in factoring and merchant cash advance pricing. A 3% factoring discount rate means you net roughly 97 cents on the dollar for that period. A 1.35 factor rate means you repay $1.35 for every dollar advanced, so you are keeping about 74 cents. Translating quotes into cents is the fastest way to feel the real price.

A document from the state confirming your entity is properly registered and current on its filings and franchise taxes. Some states call it a certificate of existence or a status certificate. Lenders request it at closing to confirm the borrower legally exists and can enter a contract. Businesses fall out of good standing more often than owners realize, usually over a missed annual report costing under $100.

Proof from an insurance carrier that a policy is in force, listing coverage types, limits, and effective dates. Lenders require one before funding and typically ask to be named as loss payee or additional insured on the collateral. On equipment and real estate deals this is a frequent last-minute delay, because agents often take several days to issue a corrected certificate with the right language.

A nonprofit organization certified by the Small Business Administration to originate and service the second-lien portion of an SBA 504 loan. In a typical 504 structure, a bank funds 50% of the project, the CDC funds 40% through an SBA-guaranteed debenture, and the borrower contributes 10%. CDCs are regional, so the one you work with depends on where the property or equipment sits. They handle the SBA paperwork on their half of the deal.

An account a creditor has given up on collecting and written off its books as a loss, usually after 120 to 180 days of non-payment. The debt does not disappear: it is often sold to a collection agency, and you still owe it. On a credit report, a charge-off is one of the heaviest negative marks there is. Recent charge-offs within the last 12 months will cost you approvals at bank and SBA tiers outright.

A loan secured by movable personal property such as vehicles, machinery, or equipment rather than real estate. The borrower takes ownership and title immediately while the lender records a lien that is released once the balance is paid. The structure is standard in equipment finance, where rates run roughly 7% to 20%. Because the borrower holds title, the asset sits on the borrower's books from day one.

The final step of a loan, where documents are signed, remaining conditions are cleared, and funds are released. Working capital and equipment deals often close with a same-day electronic signing, and borrowers working through Quordx can see money in as few as 3 to 7 business days. Commercial real estate and SBA closings run through a title company and escrow and take considerably longer.

The full set of fees due at funding: origination, underwriting, legal, appraisal, title, environmental, and filing charges. Small Business Administration (SBA) and commercial real estate deals carry the heaviest load, sometimes several percent of the loan. Most of it gets netted out of your proceeds, so you receive less than the approved amount while repaying on the full face value. Demand an itemized estimate before you commit.

Assets a borrower pledges to back a loan, giving the lender something to recover if the loan is not repaid. Real estate, equipment, inventory, receivables, and cash accounts all qualify. Secured loans price lower than unsecured ones because the lender's downside is smaller, often by several points of rate. Lenders discount collateral heavily in their own math: used equipment might be credited at half its value, and inventory at less.

Accounts that have gone unpaid long enough to be handed or sold to a third-party agency for recovery. Underwriters look at three things: how much, how recent, and what kind. A $200 medical collection from four years ago rarely changes a decision. Multiple open commercial collections in the past year signals a business that is not paying its obligations, and that closes doors quickly across every product tier.

The contract governing a business's right to occupy space it does not own. Lenders care about the remaining term, because a lease with eight months left behind a five-year loan is a real risk. On equipment and inventory deals they may also require a landlord waiver. Read the guarantee clause in your own lease, since many commercial leases already contain a personal guarantee.

A loan secured by income-producing or owner-occupied business real estate. Terms typically run five to ten years with amortization stretched across 20 to 25 years, which creates a balloon payment at maturity. Lenders size the loan on debt service coverage and loan-to-value, commonly capping between 65% and 80%. SBA 504 financing offers longer fixed terms and lower down payments for owner-occupied property.

A mortgage secured by property used for business purposes: office, retail, industrial, multifamily, or mixed use. Most conventional commercial loans require 20%–30% down, amortize over 20–25 years, and carry a balloon at year 5, 7, or 10, meaning you refinance before the term ends. SBA 504 is the exception worth knowing, since it allows as little as 10% down with a long fixed-rate second mortgage.

A charge for a lender reserving capital you have not borrowed yet, common on lines of credit and construction loans. It is usually a small percentage of the undrawn portion, billed quarterly or annually. The practical lesson: an unused line of credit is not free. If you are holding a large facility purely as insurance, price the standby cost and decide whether the peace of mind is worth it.

A lender certified by the U.S. Treasury to serve low-income and underbanked communities, including many small businesses that banks decline. CDFIs include loan funds, credit unions, and community banks, and they often accept weaker credit, shorter time in business, or thinner collateral than a conventional lender. Pricing usually sits well below alternative lenders. The tradeoff is slower closings and geographic or mission-based eligibility limits.

Interest charged on both the principal and the interest that has already accrued, so the balance grows on itself. Most business term loans use simple interest on a declining balance instead. Compounding bites hardest on revolving debt: business credit cards and some lines of credit roll unpaid interest into the balance monthly, which is how a modest balance quietly becomes a large one.

Exposure created when too much of your revenue depends on a single customer, industry, or region. A lender will flag any account representing more than roughly 20% to 25% of revenue, because losing it would change the business overnight. Factoring companies apply concentration limits directly, capping how much of your advance can come from one debtor. If you have one dominant customer, expect a smaller offer or a request for additional collateral.

A clause in which the borrower agrees in advance that if the lender declares a default, a judgment can be entered against them without a trial or any chance to argue. It turns a disputed balance into a frozen bank account within days. New York banned their use against out-of-state borrowers in 2019 after widespread abuse in the merchant cash advance market. Never sign one casually.

Short-term financing that funds a building project in stages rather than one lump sum. Money is released through draws tied to completed milestones, with an inspector verifying work before each release. You pay interest only on the amount drawn during construction, then convert to permanent financing or refinance once the certificate of occupancy is issued. Lenders typically want 20%–30% equity in the project and a fixed-price contract from a licensed general contractor.

A short-term loan that converts into equity in the company instead of being repaid in cash, usually when a priced funding round closes. It carries an interest rate and maturity date like debt, but the real terms are the discount and valuation cap that determine how many shares the note becomes. It is common in early-stage startup rounds because it lets both sides delay the argument about what the company is worth.

A promise by one business entity to repay the debt of another, usually a parent company backing a subsidiary or an affiliate under common ownership. Lenders ask for it when the borrowing entity is thin on assets but sits inside a stronger group. The guarantor's financials get underwritten alongside the borrower's. It shifts risk between companies rather than onto an individual, which is the key distinction.

A person who signs the loan alongside you and becomes equally responsible for repaying it, with their credit on the line from day one. Different from a guarantor in that a co-signer is a primary borrower rather than a backstop. Adding a strong co-signer can pull a marginal file into approval or knock the rate down. It is also a real financial risk for that person, so treat the ask seriously.

What money costs your business, expressed as a rate across every source you use, from bank debt to equity to a card balance. The number only means something next to the return the money will generate. A 30% Annual Percentage Rate loan funding an inventory buy that turns at 60% margin can be a good trade. The same loan covering a payroll shortfall is just a slower version of the same problem.

A promise inside a loan agreement to do something, or to refrain from something, for as long as the debt is outstanding. Affirmative covenants require action, such as delivering financial statements quarterly. Negative covenants prohibit action, such as taking on new debt or selling equipment without consent. Financial covenants set hard numbers, commonly a debt service coverage ratio at or above 1.25. Breaking one is a default even if every payment has been made on time.

A lender's internal set of minimum requirements: credit score floor, time in business, monthly revenue, industry restrictions, state restrictions, and how many existing positions they will sit behind. Every lender has one and no two are identical. This matters enormously: being declined almost always means you fell outside one lender's box, not that you are unfundable. The same file that gets a no from a bank can get three yeses from alternative lenders the same week.

A company that collects and sells credit history data. On the consumer side there are three: Experian, Equifax, and TransUnion. On the business side, Dun & Bradstreet, Experian Business, and Equifax Business each maintain separate files that do not talk to each other. Your data can differ between them, which is why a lender pulling one bureau may see a different picture than a lender pulling another.

The group of senior lenders inside a bank or credit union that votes on loan approvals above a certain dollar threshold. Below that limit, an individual underwriter can approve alone. Committee review is why bank and SBA decisions take weeks rather than days, and why committees often meet only once or twice a month. Ask early where the threshold sits and when the committee meets, because it dictates your real timeline.

A record on your credit report showing that someone requested your file. Hard inquiries, tied to actual credit applications, can shave a few points and stay visible for two years. Soft inquiries, from prequalification checks or your own review, do not affect the score. Excessive hard pulls in a short window make underwriters suspicious that you are shopping desperately or stacking, which is a real decline reason.

The detailed file a bureau keeps on your borrowing history: open accounts, balances, payment history, public records, and inquiries. Business lenders pull both personal and business reports on most deals. Pull your own first, since roughly one in five reports contains an error, and a wrong late payment or a stranger's collection account can move your score enough to change your pricing tier.

The percentage of your available revolving credit that you are currently using, calculated as balances divided by limits. It is roughly 30% of a FICO score, second only to payment history. Under 30% is the common guidance and under 10% is where high scores live. Maxed business credit cards signal cash-flow strain to an underwriter even when you have never missed a payment, so paying balances down before applying is one of the fastest score levers you have.

An underwriter's overall judgment that you will repay as agreed, built from credit history, cash flow, collateral, time in business, and industry risk together. No single number determines it. A 640 score with $60K in monthly deposits and four years in business is more creditworthy in practice than a 720 with erratic revenue and eight months of history. Understanding that the file is judged as a whole is the difference between guessing and preparing.

A structure in which collateral pledged for one loan also secures other loans from the same lender. Pay off the first loan and the lien stays in place, because it still backs the second. It is common with equipment lenders and bank relationships, and it quietly removes your ability to refinance one piece of debt on its own. The phrase to look for sits in the security agreement.

Current assets divided by current liabilities, a quick measure of whether a business can cover what it owes over the next twelve months. A ratio of 1.0 means assets and obligations are even; most lenders want 1.25 or better, and some write it into covenants. Because current assets include inventory and prepaid items, a healthy current ratio can still hide a cash problem if that inventory does not move.

A fixed amount debited from your business bank account every business day, standard on merchant cash advances and many short-term loans. Weekends and holidays are skipped, so you will see 21 or 22 debits a month. The cash flow impact is far harsher than the monthly total suggests, because the money leaves before your receivables arrive. Model your lowest-revenue week, not your average one.

A single new loan used to pay off several existing obligations, replacing multiple payments with one. The honest test is total cost, not monthly payment: stretching balances over a longer term lowers what you pay each month while raising what you pay overall. Consolidation genuinely helps when you are refinancing expensive short-term debt, such as stacked merchant cash advances, into a conventional term loan at a materially lower rate. Check for prepayment penalties on the debts you are retiring.

Raising money by borrowing it, with an obligation to repay principal plus interest on a defined schedule. Unlike selling equity, debt does not dilute ownership, and interest is generally tax deductible. The tradeoff is a fixed payment that comes due whether or not the month goes well. Most small business capital is debt, from bank term loans around 8% to 13% for strong credit up through far more expensive alternative products.

A list of every outstanding business debt showing the lender, original amount, current balance, monthly payment, interest rate, maturity date, and collateral. Banks and SBA lenders require it in writing, usually on their own form. Fill it in completely and accurately: underwriters cross-check it against your bank statements, and a payment you left off that shows up in the deposits is treated as concealment, not an oversight.

Net operating income divided by total annual debt service, measuring how much cash you generate for every dollar of debt payments. Most lenders want 1.25x or better, meaning $1.25 of income for every $1.00 of payments. Example: $150,000 in net operating income against $100,000 in annual principal and interest is a 1.50x DSCR, comfortably approvable. At 1.00x you are exactly breaking even, and almost no bank or SBA lender will fund that.

Under the Uniform Commercial Code, the party that owes the money and grants the security interest in the collateral. In everyday conversation it simply means the borrower. The distinction matters on public filings, where the debtor name must match the exact legal name on the state registration. A misspelled or outdated debtor name can make a filing unenforceable, which is why lenders are strict about matching your formation paperwork.

Total monthly debt payments divided by gross monthly income, expressed as a percentage. On business loans it is applied to the owner personally, since the guarantor's household obligations affect whether they can cover a personal guarantee. Most lenders want personal DTI under 45%, and SBA lenders often look for the low 40s or better. Business lenders also run a parallel business-level version, usually framed as debt service coverage instead.

The specific factor a lender cites for turning down an application, stated in the adverse action notice. Common ones: score below floor, insufficient time in business, too many existing positions, negative days, restricted industry, or revenue below minimum. Treat the reason as a map. Some are fixable in 30 days, like paying down utilization or clearing NSFs, and some just mean a different lender tier is the right target.

A real estate security instrument used instead of a mortgage in roughly half of US states, involving three parties: the borrower, the lender, and a neutral trustee who holds title until the debt is paid. The practical difference is foreclosure. A deed of trust generally permits a non-judicial foreclosure, which is faster and cheaper for the lender than the court process a mortgage requires.

Failure to meet the terms of a loan agreement, most often by missing payments, though it can also be triggered by breaking a covenant or letting insurance lapse. Most business loan contracts define default after 30 to 90 days of non-payment, and the loan documents spell out exactly when. Once declared, the lender can accelerate the full balance, seize collateral, and pursue the personal guarantee. Read the default clause before you sign, not after.

A payment that is past due but not yet charged off, tracked in 30-day buckets: 30, 60, 90, and 120 days late. Severity and recency both matter. One 30-day late two years ago barely registers. A 60-day late within the past six months will push you out of bank and SBA territory and into alternative pricing, and a pattern of them signals cash flow problems no explanation letter fully fixes.

How many separate deposits hit your business account each month, which underwriters use as a proxy for how steady and diversified your revenue is. Revenue-based lenders typically want at least 5 to 10 deposits a month. Three large deposits from one customer looks like concentration risk even at the same total volume. Businesses paid on long invoice cycles often score poorly here and are usually better served by factoring than by a daily-repayment product.

The accounting method of spreading the cost of a long-lived asset across its useful life instead of expensing it in the year of purchase. A $60,000 truck depreciated over six years shows $10,000 of expense annually. Depreciation reduces reported profit without touching cash, which is exactly why lenders add it back when calculating EBITDA and debt service coverage. Heavy depreciation is not a red flag; it usually means you own real assets.

A funder that underwrites with its own capital and holds the loan on its own balance sheet, rather than arranging it through someone else. Working directly can mean fewer parties in the deal, but it also means one set of credit criteria: if you do not fit their box, the answer is no and you start over somewhere else. Many companies marketing themselves as direct lenders actually broker out part of their volume.

The fee a factor charges to purchase your invoice, expressed as a percentage of face value per period. Rates commonly run 1% to 5% per 30 days. A 3% rate on a $100,000 invoice paid in 30 days costs $3,000. If your customer pays in 60 days, most agreements charge for the second period too, which is why slow-paying customers make factoring expensive fast.

A registered trade name that lets a business operate under something other than its legal entity name. Filing is cheap, usually $10 to $100 at the county or state level, and it creates no separate legal entity and no liability protection. Lenders underwrite the legal entity, not the trade name, so loan documents and the bank account must use the legal name exactly.

The act of pulling money out of a line of credit or a construction loan. On a revolving line, a draw is usually instant and moves cash to your operating account; interest starts accruing on that amount only. On a construction loan, a draw request must be documented and often inspected before funds release. Some lenders charge a flat draw fee of 1%–3% per pull, which quietly raises your effective cost if you draw often.

A charge applied each time you pull funds from a line of credit, either a flat dollar amount or a percentage of the draw, commonly 1% to 3%. A line advertised at a modest rate becomes expensive if you draw six times a year. Compare lines on total cost per year at your realistic usage pattern, not on the headline rate alone.

The oldest business credit bureau, which assigns every registered business a nine-digit D-U-N-S Number and maintains its trade payment history. Its headline score is PAYDEX, running 0–100 based on how promptly you pay suppliers. Getting a D-U-N-S Number is free and worth doing early, but the file stays empty until vendors actually report to D&B. Ask your suppliers directly whether they report, because many do not.

A reduction in the total amount owed if you retire an advance or short-term loan ahead of schedule. It matters most on merchant cash advances, where the total repayment is fixed by the factor rate: paying early with no discount simply compresses the same dollar cost into fewer months and drives your effective Annual Percentage Rate higher. Get any discount written into the contract. A sales rep's verbal promise is worth nothing.

Earnings before interest, taxes, depreciation, and amortization, a measure of operating profitability that strips out financing decisions and non-cash accounting charges. Lenders use it as a proxy for cash generation and to size debt, often lending against a multiple of EBITDA or testing debt service coverage against it. It differs from net income, which includes those costs, and from free cash flow, which subtracts the real capital spending that EBITDA ignores.

The true annualized cost of financing after converting a non-standard price, such as a factor rate, flat fee, or discount rate, into a comparable percentage that accounts for how fast you repay. Speed is everything here. A 1.35 factor repaid over 8 months typically works out to something in the 70% to 100%-plus range. Always convert before comparing two offers priced in different languages.

A nine-digit federal tax identification number issued by the IRS to a business, functioning much like a Social Security number for the entity. It is free, and the online application takes about fifteen minutes. Every lender asks for it, and it has to match IRS records exactly, including the registered entity name. Mismatches between the number and the name are a routine cause of underwriting delays.

An investigation of a commercial property for contamination risk before a lender will accept it as collateral. A Phase I assessment reviews records, site history, and a physical walkthrough, and typically costs $2,000 to $5,000. If it flags a concern, a Phase II adds soil and groundwater sampling at considerably higher cost. SBA and most bank real estate loans require at least a Phase I on non-residential property.

One of the three main business credit bureaus, producing a Business Credit Risk Score and a Business Failure Score alongside payment and public-record data. It pulls in financial trade data, leases, and public filings like liens and judgments. Banks lean on it more than alternative lenders do. Its records tend to surface judgments and tax liens quickly, so clear those before applying anywhere that pulls Equifax.

A loan used to buy business equipment, where the equipment itself serves as the collateral. Because the lender can repossess the machine, approval standards are looser and rates are lower than unsecured options, roughly 7%–20% depending on credit and the asset. Terms are matched to the useful life of the equipment, commonly 2–7 years. Many lenders finance 100% of the purchase price, and soft costs like delivery and installation can often be rolled in.

Paying to use equipment for a set term instead of buying it outright. A capital lease works like a purchase with a token buyout at the end, while an operating lease is closer to a rental and returns the asset to the lessor. Leasing preserves cash and can make sense for technology that ages fast, but the total payments usually exceed the purchase price. Compare the lease against a financing quote before assuming it is cheaper.

A pre-approved amount you can draw against repeatedly to buy equipment, rather than applying for a separate loan each time. Each draw typically converts into its own schedule with its own term. This suits contractors, fleet operators, and manufacturers who buy assets throughout the year and do not want to restart underwriting every quarter. Lines are usually reviewed annually, and unused capacity may carry a small non-use fee.

The owner's residual stake in the business: total assets minus total liabilities. Equity grows through retained profits and owner contributions and shrinks through losses and draws. Lenders read it as skin in the game, and negative equity on a balance sheet will stop most bank and SBA applications. Raising equity capital means selling part of the company, which costs no monthly payment but costs ownership permanently.

An arrangement where a neutral third party holds money or documents until the conditions of a deal are met. In commercial real estate closings, an escrow or title agent holds the down payment and loan proceeds and releases them only once everything is signed and recorded. Lenders also use escrow accounts after closing, collecting property taxes and insurance premiums alongside the monthly payment.

How many advances or loans are already being repaid directly out of your business bank account, and it is the first thing a revenue-based underwriter counts. They see it in your statements as recurring daily or weekly debits, whether or not you disclose it. One open position is normal and financeable. Two is a harder conversation. Three or more and most quality lenders decline outright, because each position takes another bite out of the same deposits.

A business credit bureau that produces the Intelliscore Plus, a 1–100 risk score, and a Financial Stability Risk Rating. It blends trade payment data, public records, demographics, and industry risk. Experian tends to have files on businesses that D&B does not, and vice versa. Checking your own business file with each of the three costs little and catches the mismatched addresses and phantom trade lines that quietly cost approvals.

A multiplier used to price merchant cash advances and some short-term financing, not an interest rate. Rates typically run 1.15 to 1.50, and the math is simple: a 1.35 factor on $50,000 means you repay $67,500, a fixed $17,500 cost that does not shrink no matter how the balance falls. Because repayment is compressed into 6 to 12 months, the effective Annual Percentage Rate usually lands between 40% and 150% or higher.

The portion of an invoice's value a factor holds back until your customer actually pays. With an 85% advance rate, the reserve is the remaining 15%, released to you after collection and after the discount fee is deducted. Reserves protect the factor against short-pays, disputes, and deductions. If your customers routinely take deductions, expect a larger reserve and slower releases.

The FICO Small Business Scoring Service score, running 0–300, which blends personal credit, business credit, and business financials into one number for small-business loan prescreening. SBA uses it to prescreen 7(a) loans, with the floor currently at 155 for small-dollar loans, though most lenders want to see 160–180 or higher before they will move. Because it mixes personal and business data, building business trade lines can lift it even when your personal score stays flat.

The personal credit score most lenders rely on, running 300–850 and built from payment history at about 35%, amounts owed at 30%, length of history at 15%, credit mix at 10%, and new credit at 10%. In business lending the floors are practical: banks want 680+, SBA typically 650–680+, online term lenders start around 600, and revenue-based products go into the 500s. Owners with 20% or more equity usually get pulled.

The umbrella term for the formal reports describing a company's finances: the balance sheet, the profit and loss statement, and the cash flow statement. Lenders classify them by how much outside scrutiny they have received. Internally prepared statements pulled from your accounting software are acceptable for most working capital deals. Larger loans and SBA files often require CPA-reviewed or audited statements, which cost real money and take weeks to produce.

A non-bank lender built around technology-first underwriting, pulling bank data, accounting software, and payment processor feeds directly instead of reading a paper file. The result is fast decisions, sometimes within hours, and models that weigh cash flow patterns more heavily than credit score. Fintech lenders are a subset of alternative lenders, not a synonym: the distinction is how they underwrite, not simply that they are not a bank.

A rate that stays the same for the entire life of the loan, so the payment never changes. Equipment financing, most Small Business Administration (SBA) 504 loans, and many bank term loans are fixed. The advantage is planning certainty: you can budget the exact payment for years. The trade-off is that you do not benefit if rates fall, unless you refinance and absorb the closing costs to do it.

The gap between when money leaves one account and when it arrives in another. It matters most on daily and weekly debit products: an Automated Clearing House pull initiated Friday can settle before Monday's card deposits land, producing an overdraft on a business that is technically profitable. Ask what time of day debits hit and how long deposits take to clear, then keep a buffer sized to the gap.

A written agreement in which a lender temporarily suspends or reduces payments instead of declaring a default. It is not forgiveness: the missed amount is usually added to the end of the term or repaid later in a lump sum, and interest keeps accruing throughout. Lenders grant it when the problem looks temporary and the borrower asks early. Waiting until two payments have already been missed makes the conversation much harder.

The IRS form that authorizes a lender to pull transcripts of your filed tax returns directly from the IRS. Lenders use it to confirm that the returns you handed over match what was actually filed. Every SBA loan requires it and most bank loans do as well. Transcripts usually come back within a few business days, though IRS backlogs can stretch that, so sign it early.

Funding used to open or expand a franchise location, covering the franchise fee, build-out, equipment, and opening working capital. Lenders like franchises because the brand has documented unit economics, and the SBA maintains a directory of franchise systems that are pre-cleared for eligibility. That directory listing can shave weeks off approval. Expect to put down 15%–30% of total project cost and to show the franchisor's Financial Disclosure Document as part of the file.

Operating cash flow minus capital expenditures, the money genuinely left over after keeping the business running and its assets maintained. Free cash flow is the strictest of the common profitability measures: net income includes non-cash charges, EBITDA ignores capital spending entirely, and free cash flow accounts for both. A business with strong EBITDA and negative free cash flow is spending everything it earns on equipment, and lenders price accordingly.

The contract used for advance-style products, most often a merchant cash advance, in which the funder purchases a set amount of your future receivables at a discount rather than lending you money. Because it is structured as a purchase, it falls outside most lending regulation and carries no stated interest rate. Read the specified percentage, the daily or weekly remittance, and any reconciliation clause before you sign.

Revenue minus cost of goods sold, expressed as a percentage of revenue. A contractor at 25% gross margin and a software company at 85% are different businesses even at identical revenue, and lenders underwrite them differently. Gross margin determines how much revenue growth actually converts to cash, which is why it drives your break-even point and how much debt the business can realistically carry.

Total sales before any expenses, discounts, refunds, or cost of goods are subtracted. Most revenue-based lenders size offers off gross monthly deposits, commonly advancing 50% to 150% of one month of revenue. Gross revenue is also the number most often overstated on applications, and since underwriters verify it against bank statements, an inflated figure costs you credibility on the entire file.

A fee the Small Business Administration (SBA) charges lenders for guaranteeing a portion of a 7(a) loan, almost always passed through to the borrower. It scales with loan size and term, and the smallest loans are frequently exempt. It is usually financed into the loan rather than paid in cash at closing, which is easy to miss. Look for it on the closing statement and confirm whether you are paying it upfront or over time.

Someone who promises to repay a loan if the borrower does not, providing a backstop rather than acting as a primary borrower. In small-business lending the personal guarantee from owners holding 20% or more is close to universal, including on nearly every SBA loan. Understand what you are signing: a personal guarantee means the lender can pursue your personal assets, and unlimited guarantees expose you for the full balance regardless of your ownership percentage.

Real estate financing priced on the value of the property rather than the borrower's credit or income. Private lenders fund these in days rather than weeks, typically at 60%–75% of the property value, with interest-only payments, terms of 6–24 months, and points paid up front. The speed is real and so is the cost, often double conventional rates. It is a tool for fix-and-flip projects, auction purchases, and situations where a bank timeline would kill the deal.

A credit inquiry tied to an actual credit application, which shows on your report for two years and can cost a few points. Multiple hard pulls for the same type of financing inside a short window, generally 14 to 45 days, are usually treated as one inquiry by scoring models. The bigger risk is not the points but the optics: a report showing eight recent lender inquiries reads as shopping distress to an underwriter.

The percentage of your daily card sales a merchant cash advance provider retains until the advance is repaid, typically 10% to 20% of receipts. Unlike a fixed daily payment, a holdback flexes with volume, so a slow week costs you less in dollars. That sounds merciful, but it stretches the repayment period without reducing the fixed total, which raises your effective Annual Percentage Rate.

A contract between two or more lenders to the same borrower that spells out who has priority to which collateral and who gets paid first if things go wrong. It is negotiated between the lenders, but the borrower is the one waiting on it. When a bank and an equipment lender both want a claim on the same assets, this document is frequently what holds up a closing.

The price of borrowing money, charged as a percentage of the outstanding balance over time. Because interest accrues on what you still owe, paying down principal directly reduces what you pay later. That is the fundamental difference from a factor rate or flat fee, where the dollar cost is locked at signing and early repayment saves you nothing unless the contract specifically allows it.

The annual percentage a lender charges on outstanding principal, stated before fees. It is not the same as Annual Percentage Rate, which adds fees, and not remotely the same as a factor rate, which is a fixed multiplier applied once. Current ranges: bank term loans roughly 8% to 13%, equipment financing 7% to 20%, and Small Business Administration (SBA) 7(a) variable loans around 9% to 11.5%.

A payment that covers accrued interest and nothing else, leaving the principal balance untouched. Construction loans, bridge financing, and some startup-period structures use interest-only for the first 6 to 24 months. It buys breathing room while a project ramps up, but the balance does not move an inch, and the payment jumps sharply once amortization begins. Know the exact date that happens.

A loan or line secured by the goods you hold for sale. Lenders advance a percentage of inventory value, commonly 50%–80%, discounted because used or seasonal stock is hard to liquidate. Retailers, distributors, and e-commerce sellers use it to stock up ahead of a busy season and repay as product sells. Expect inventory reporting, and expect the lender to value slow-moving or perishable goods far below what you paid.

Selling your unpaid invoices to a third party at a discount, with that factor taking over collection from your customer. You typically receive 70%–90% up front, then the remainder minus the fee once your customer pays. Discount rates run roughly 1%–5% per 30 days outstanding. The key thing to understand: your customer will be told to pay the factor, so the relationship is no longer entirely yours. Some industries treat this as routine, others do not.

Borrowing against your unpaid invoices while keeping collections in your own hands. The invoices serve as collateral, you draw a percentage of their value, and you repay as customers pay you directly. Your customers never learn a lender is involved, which is the main reason owners choose this over factoring. Costs are broadly similar to factoring, but underwriting leans more on your business, since the lender is not stepping in to collect.

A sales company that markets funding products on behalf of lenders and funders without underwriting or funding anything itself. ISOs are everywhere in the merchant cash advance channel, where they are typically paid a commission per funded deal, sometimes as points added directly to the borrower's cost. That compensation structure explains a great deal of aggressive cold calling. Ask any caller whether they are an ISO, a broker, or the actual funder.

A court ruling that you owe a specific debt, which gives the creditor legal tools to collect, including bank levies and liens against property. Judgments no longer appear on consumer credit reports, but lenders find them through public-record searches and business bureau data, and they absolutely find them. An open judgment blocks SBA and most bank financing. Satisfying it and filing the release is worth doing before you apply anywhere.

A signed statement in which a property owner gives up any claim to the lender's collateral sitting on leased premises. Without one, a landlord in many states can hold equipment or inventory against unpaid rent, ahead of the lender. Lenders financing machinery or inventory inside a rented facility ask for it routinely. Getting a landlord to sign can take weeks, so start the request early.

A charge triggered when a payment misses its due date, usually a flat amount or a percentage of the payment due. On daily and weekly debit products, a failed Automated Clearing House pull can trigger a returned-payment fee from the lender and a nonsufficient funds charge from your bank on the same day, sometimes on each retry. Many contracts also treat repeated failures as an event of default, which is a far bigger problem than the fee.

The set of funding sources a broker or platform can actually submit your file to, and the reason one application can produce multiple offers. Depth matters more than headcount: fifty lenders covering every product category beats two hundred that all do the same thing. Quordx maintains a vetted network of more than 50 lenders and routes each applicant to the 3 to 7 that fit their profile.

The degree to which a business is financed by borrowed money rather than owner equity. Common measures include debt-to-equity and debt-to-EBITDA, and most lenders grow uncomfortable above roughly 3 to 4 times EBITDA. Moderate leverage magnifies the return on capital you already have. Too much of it turns an ordinary slow quarter into a missed payment, because the obligations do not shrink when revenue does.

A public-records check for existing claims against your business assets, run through UCC filings at the state level plus county and federal records. Underwriters use it to see who already holds rights to the collateral being offered. A blanket UCC-1 from a prior lender covering all assets can block a new secured loan entirely. Old liens from paid-off debts often sit unterminated for years, so verify and request terminations before you apply.

How quickly an asset can be converted to cash without losing value, and by extension how much readily available cash a business holds. Cash is perfectly liquid, receivables are close behind, inventory is slower, and real estate is slowest of all. Underwriters test liquidity because a business fails when it runs out of cash, not when it runs out of assets. Strong balance sheets with poor liquidity still miss payroll.

The master contract governing the entire lending relationship, covering the amount, rate, repayment schedule, covenants, collateral, representations, and what counts as a default. The promissory note is the promise to pay, and the loan agreement is everything else. On smaller working capital deals the two are often combined into a single document. The default and remedies section is the part most worth reading closely.

The form that starts underwriting, collecting entity details, ownership, revenue, existing debt, and the amount requested. Applying to several lenders one at a time is slow and can trigger multiple credit pulls. Quordx uses a single application that takes about 10 minutes, then routes the file to the 3 to 7 lenders in its network that actually fit the profile, at no cost to the borrower.

The length of time you have to repay a loan, from a few months to twenty-five years depending on the product. Term drives the payment: the same $250,000 stretched over five years instead of two cuts the monthly payment roughly in half while increasing total interest paid. Short terms are not automatically cheaper and long terms are not automatically better. Match the term to the useful life of whatever you are financing.

The loan amount divided by the appraised value of the collateral, expressed as a percentage. A $400,000 loan against a $500,000 building is 80% LTV. Lower LTV means more borrower equity and less lender risk, which translates directly into better pricing. Commercial real estate lenders typically cap at 65% to 80%, and equipment financing often runs 80% to 100% of cost depending on how easily the asset resells.

A recurring monthly or annual charge for keeping an account or facility open, billed separately from interest. Lines of credit, factoring agreements, and merchant accounts all carry versions of it, sometimes labeled a monthly minimum. On a small facility, a few hundred dollars a year is a real percentage of your borrowing cost. Add it to the interest before you compare offers.

The date the final payment is due and the loan is retired. It matters most where the amortization schedule and the maturity date do not match, because that gap is where balloon payments live. Maturity should roughly track the useful life of what you are financing. Financing a three-year asset over seven years means paying for something long after it stopped earning.

A purchase of your future revenue at a discount, repaid through a fixed daily or weekly debit or a percentage of card sales. It is priced with a factor rate, typically 1.15 to 1.50, meaning you repay $1.15 to $1.50 for every dollar received. That translates to roughly 40%–150%+ effective APR. Approval is fast and credit requirements are low, but an MCA should be a deliberate short-term choice, never the first option you consider.

The company that handles your credit and debit card transactions and deposits the proceeds into your bank account. Processors matter in lending because their statements are primary underwriting documents for revenue-based products, showing true card volume month by month. They are also the mechanism behind split funding, where the processor diverts an agreed percentage of each batch to a funder before you ever see it.

A layer of capital that sits between senior debt and equity in the repayment order. It is usually structured as subordinated debt with warrants or a conversion feature, so the lender earns a high coupon plus upside if the company grows. Because mezzanine lenders get paid only after the senior bank does, they price for that risk, often in the mid-teens and above. It shows up in acquisitions and buyouts where the senior loan does not cover the full purchase price.

A small business loan, generally under $50,000, made by a nonprofit or community lender rather than a bank. Average sizes tend to land in the $10K–$15K range. These programs exist for borrowers banks decline: startups, sole proprietors, and owners with limited credit history. Many pair the money with free technical assistance and bookkeeping help, which is often worth as much as the loan. Approval is relationship-heavy and slower than online lending, but the rates are far more reasonable.

A fixed amount due once per month, the standard structure for term loans, Small Business Administration (SBA) loans, equipment financing, and commercial real estate debt. It is the gentlest structure on cash flow because it gives receivables time to arrive between payments. When comparing against a daily or weekly product, convert everything to total dollars paid per month so you are looking at the same picture.

Days when your business bank account closed with a balance below zero. Underwriters count them across the last three to six months, and most revenue-based lenders tolerate roughly three per month, with the stricter ones allowing zero to two. Along with NSF counts, negative days kill more revenue-based approvals than credit score does. Timing an application for a month after you have run clean statements is one of the highest-return things a borrower can do.

What is left after every expense, including cost of goods, operating costs, interest, taxes, depreciation, and amortization, is subtracted from revenue. Net income is the bottom line of the profit and loss statement and the figure your tax return reports. It sits below EBITDA, which excludes financing and non-cash charges, and it differs from free cash flow, since non-cash deductions can push net income negative while the bank balance grows.

Property revenue minus operating expenses, calculated before debt service, income taxes, depreciation, and capital expenditures. NOI is the core metric in commercial real estate lending: divide it by annual debt service and you get the debt service coverage ratio, which most commercial lenders want at 1.20 or better. Because NOI excludes the mortgage payment, it measures the property itself rather than how it was financed.

The payment window you extend to a customer on an invoice, written as Net 30, Net 60, or Net 90. Generous terms win business and quietly finance your customers with your own cash. A company selling on Net 60 while paying suppliers in 30 carries a permanent 30-day hole, which is the exact gap invoice factoring and lines of credit are built to fill.

Factoring where the factor absorbs the loss if your customer fails to pay due to insolvency. You sell the invoice and the credit risk transfers with it, so a customer bankruptcy is the factor's problem, not yours. Protection is narrower than the name suggests: most agreements exclude non-payment caused by disputes, short shipments, or quality complaints. Expect to pay a higher discount rate than recourse factoring, and read exactly which failure scenarios are covered.

The formal written notice a lender sends declaring that the borrower has breached the loan agreement, identifying the breach and stating what happens next. Some agreements grant a cure period of 10 to 30 days, while many working capital and advance contracts grant none at all. Receiving one typically accelerates the full balance and unlocks collection rights. Call the lender before the cure window closes, not after.

A bank charge that hits when a payment or check is presented against an account without enough money to cover it, and every one of them shows on your statement. Underwriters count them directly. Most revenue-based lenders draw the line around three per month, and some tighten to one or two. Together with negative days, NSF counts kill more of these approvals than credit score does, because they predict whether daily payments will clear.

The internal document that governs a limited liability company: who owns what percentage, who can sign, how profits are distributed, and how disputes get settled. Most states do not require it to be filed, but nearly every lender asks to see it. Underwriters go straight to the signature authority section, because they need proof the person signing loan documents can legally bind the company.

The recurring costs of running the business day to day: rent, payroll, utilities, insurance, software, marketing, and similar items. OpEx is expensed in the period it occurs, unlike capital expenditures, which are capitalized and depreciated over years. Lenders study the trend more than the level, since operating expenses climbing faster than revenue is one of the clearest early signals that a business is losing control of its margins.

An upfront charge for processing and funding a loan, typically 1% to 5% of the amount, usually deducted from your proceeds rather than billed separately. Borrow $100,000 with a 3% origination fee and $97,000 hits your account while you make payments on the full $100,000. That gap is exactly why the Annual Percentage Rate, not the quoted interest rate, is the number that tells the truth.

Property where your business occupies a majority of the space, usually at least 51%. That threshold matters because it unlocks SBA 504 and 7(a) financing, which means as little as 10% down instead of the 20%–30% an investment property requires. Lenders treat owner-occupied deals as lower risk because your business operations, not a tenant's rent, service the debt. If you lease out more than 49% of the square footage, the deal becomes an investment property.

Money an owner takes out of the business for personal use, recorded as a reduction of equity rather than a business expense. Draws are common in sole proprietorships, partnerships, and LLCs, where owners are not on formal payroll. Underwriters often add reasonable draws back when calculating cash flow, since they are discretionary. Large or erratic draws that leave the account thin will work against you.

A charge for assembling and preparing a loan application file, most common in Small Business Administration (SBA) lending where a packager compiles financials, projections, and government forms. On a complex SBA acquisition it can be legitimate work worth paying for. On a straightforward working capital request it is mostly margin dressed up as service. Quordx charges no packaging fee and no application fee.

Dun & Bradstreet's business payment score, running 0–100, based entirely on whether you pay suppliers on time. An 80 means you pay exactly on terms, and scores above 80 mean you pay early. Below 70 signals chronic late payment to vendors. Unlike personal credit, PAYDEX only reflects trade payments, so it moves only when reporting vendors actually submit your history. Two or three reporting trade accounts paid early can build a usable score in months.

The record of whether you have paid your obligations on time, and the single heaviest factor in credit scoring at roughly 35% of a FICO score. Lenders look at recency and severity, not just the count. A 30-day late three years ago is background noise. Two 60-day lates in the past year reshapes your entire pricing tier. This is also the slowest factor to repair, since it improves only with time and consistency.

A written statement from an existing lender giving the exact amount required to retire a loan in full, including interest through a stated date and any prepayment penalty. It is valid only through that date, with a per diem charge for each day beyond it. Refinancing and consolidation deals cannot close without one. Some lenders take five to ten business days to issue it, so request it early.

Your individual FICO or VantageScore, running 300–850, which nearly every business lender pulls on owners holding 20% or more. Small-business lending has never really separated the owner from the business. Practical floors today: banks 680+, SBA typically 650–680+, online term lenders from around 600, and revenue-based products into the 500s. Below 600 the question stops being whether you can get funded and becomes what it will cost.

A summary of an owner's personal assets, liabilities, and net worth outside the business. SBA loans use Form 413 and require one from every owner holding 20% or more. Lenders use it to judge whether a guarantor could actually cover the debt and to spot personal obligations that compete with the loan payment. Home equity, retirement balances, and existing personal debt draw the most attention.

A promise by an individual, almost always an owner, to repay the business debt personally if the company cannot. It cuts straight through the liability protection of an LLC or corporation and puts personal assets on the line. Most small business lending requires one, and unsecured lenders essentially all do. A limited guarantee caps exposure at a dollar amount or an ownership share, and it is worth negotiating for.

Upfront fees where each point equals one percent of the loan amount, paid at closing. Two points on a $250,000 loan is $5,000. Points show up most in commercial real estate, bridge lending, and hard money. They hurt worst on short-term debt, because you are amortizing the same upfront cost over months instead of years, which pushes the effective Annual Percentage Rate well above the quoted rate.

A lender's conditional indication that it will fund you, typically after reviewing bank statements and pulling credit, subject to final documentation. It carries more weight than a pre-qualification because real data was reviewed. It is still not a commitment, and the industry uses the two terms loosely enough that a "pre-approval" from one shop is a "pre-qual" at another. Ask what was actually verified and what conditions remain, because those answers are what matter.

A fee for retiring a loan before its scheduled maturity, designed to protect the lender's expected interest income. Common structures include a stepped-down percentage such as 5-4-3-2-1 across five years, or a fixed number of months of interest. Small Business Administration (SBA) 7(a) loans with terms of 15 years or longer carry a penalty in the first three years. Check for it before you sign, because it directly limits your ability to refinance into a better rate.

An early read on likely approval based on information you provide, usually without a hard credit pull. It is a soft filter, not an offer. The industry uses pre-qualification and pre-approval loosely and often interchangeably, so neither one guarantees funding and both can evaporate at underwriting. The useful part is direction: a good pre-qual tells you which lender tier and roughly what pricing to expect before you spend time on a full file.

The benchmark rate United States banks use for their most creditworthy borrowers, published by the Wall Street Journal and 7.00% as of October 2026. It moves with the Federal Reserve's decisions, not with your business. Many commercial loans are quoted as Prime plus a spread, and Small Business Administration (SBA) 7(a) variable rate caps run from Prime plus 2.25% to Prime plus 4.75% depending on loan size and term.

A report of revenue, costs, and resulting profit across a period of time, typically a month, a quarter, or a year. Lenders read it for gross margin, expense trend, and whether operating income covers a new payment with room to spare. They usually request year-to-date figures plus the prior full year. Consistency between the statement and your actual bank deposits matters more than the profit figure itself.

The written promise to repay a specific sum on specific terms, signed by the borrower. It is the instrument a lender sues on, and it is what gets sold or assigned when a loan changes hands. It states principal, rate, payment schedule, maturity date, and late charges. When the note and the loan agreement conflict on a term, the documents themselves normally specify which one controls.

Funding that pays your supplier directly so you can fill a confirmed customer order you could not otherwise afford. The financier typically covers 70%–100% of supplier cost, the goods ship, your customer pays, and the financier is repaid from those proceeds. It only works for finished goods you resell, not for manufacturing from raw materials or for service work. Costs run higher than a line of credit, so it is best used to accept an order that would otherwise walk away.

Cash, marketable securities, and receivables divided by current liabilities, a stricter cousin of the current ratio. The difference is inventory: the quick ratio excludes it, along with prepaid expenses, on the theory that neither converts to cash fast enough to pay a bill next week. Lenders lean on the quick ratio for inventory-heavy businesses like retailers and distributors, where the current ratio flatters the balance sheet.

A lender's commitment to hold a quoted rate for a defined window while the loan closes, standard in commercial real estate and longer Small Business Administration (SBA) deals. Locks typically run 30 to 90 days and sometimes carry a fee or a deposit. Without one, the rate on your term sheet is an estimate, and a benchmark move between approval and closing lands on you. Confirm in writing whether your quote is locked or floating.

Restructuring the mix of debt and equity on a company's balance sheet. In small business deals it usually means bringing in new debt to buy out a partner, return cash to owners, or replace expensive obligations with cheaper ones. The business keeps operating as-is; what changes is who has a claim on it and in what order. Lenders scrutinize recaps closely because the proceeds often leave the company rather than fund growth.

Factoring where you remain responsible if your customer does not pay the invoice. If the receivable goes unpaid past an agreed window, typically 60–120 days, the factor charges it back and you owe the advance. Because you keep the credit risk, discount rates run lower than non-recourse arrangements. The vast majority of factoring in the market is recourse, even when the sales conversation implies otherwise, so confirm which one you are actually signing.

Replacing an existing loan with a new one on different terms. The usual goals are a lower rate, a longer amortization to cut the monthly payment, or pulling equity out as cash. Run the full comparison before moving: closing costs, prepayment penalties on the old loan, and total interest over the new term. Refinancing high-cost short-term debt into an SBA or bank loan at 9%–13% can transform cash flow, and it is one of the more common reasons owners apply.

The process of confirming that the revenue you claimed actually exists, done through bank statements, processor statements, tax returns, or read-only bank connections. Overstating revenue on the application is the fastest way to lose credibility with an underwriter, because the statements arrive within hours and the numbers either match or they do not. Report gross deposits the way the bank shows them and let the underwriter make the adjustments.

Capital repaid as a fixed percentage of your monthly revenue until a set multiple of the advance is returned. Payments flex with sales, so slow months cost less and strong months retire the balance faster. Credit requirements are the loosest in the market, reaching into the 500s, because the lender underwrites deposit history rather than FICO. The trade is cost. Compute the effective annualized rate before signing, since the multiple structure hides how expensive fast repayment becomes.

An arrangement initiated by a large buyer that lets its suppliers get paid early by a financier, at a rate based on the buyer's credit rather than the supplier's. The buyer approves the invoice, the financier pays the supplier at a small discount, and the buyer pays the financier on the original due date. Suppliers get cash in days at a cheaper rate than they could obtain alone. Access depends entirely on whether your customer runs such a program.

Lender shorthand for a revolving credit facility, the reusable credit line you can draw down and repay repeatedly. You will hear it in credit committee language and see it in loan documents: "the revolver," as opposed to "the term piece." Nothing about the product differs from a business line of credit; the word simply signals you are talking to someone on the lending side. When a banker asks whether you want a revolver or a term loan, they are asking whether your need repeats.

The structural term for a credit arrangement you can draw down, repay, and redraw up to a set limit for the life of the agreement. It describes the mechanics in a credit agreement, where a term loan amortizes to zero and a revolver resets. Facilities usually carry an unused line fee of 0.25%–0.50% on undrawn capacity, plus financial covenants and an annual renewal. A business line of credit is the small-business version of this structure.

A bank's contractual right to take money out of your deposit accounts to cover a debt you owe that same bank. It is buried in most business account agreements and in most loan documents. If you borrow from the bank holding your operating account, a default can freeze your payroll balance without any court order. Plenty of owners deliberately keep their borrowing and their deposits at different institutions.

Setting the rate and terms based on how risky the borrower looks, so weaker files pay more. It is why the same $150,000 request can price at 9% through SBA, 14% through a bank, or a 1.35 factor rate through an advance. The spread between tiers is enormous. Moving your file up one tier, often by fixing a single factor like utilization or NSF counts, is usually worth far more than negotiating within a tier.

How many months a business can keep operating before cash runs out, calculated by dividing available cash by monthly net burn. Runway is the standard health measure for growth-stage and pre-profit companies, and it drives timing: most operators start a financing process with six months left, not two. Applying with less than 60 days of runway narrows your options and worsens your pricing.

A transaction where you sell an asset you own, usually real estate or heavy equipment, and immediately lease it back from the buyer. You get a lump sum of cash and keep using the asset without interruption. It converts equity locked in a building or a fleet into working capital, often at a better rate than a loan against the same asset. The trade is permanent: you give up appreciation and take on a long-term lease obligation with scheduled rent increases.

A fixed-rate loan for buying commercial real estate or heavy equipment, structured in three parts: a bank funds 50%, a Certified Development Company funds 40% through a debenture, and you put down 10%. The CDC portion carries a long fixed rate over 20 or 25 years, which is the main draw when rates are moving. It cannot be used for working capital or inventory. Projects generally must create or retain jobs, or meet a public policy goal.

The Small Business Administration's flagship program, where a bank makes the loan and the SBA guarantees a large portion of it, letting lenders approve deals they would otherwise decline. Loans go up to $5 million with terms of 10 years for working capital and equipment or 25 years for real estate. Variable rates are capped at Prime plus 2.25% to 4.75%, roughly 9%–11.5% today. Expect a document-heavy process and 45–90 days to close, plus a personal guarantee.

A set of four SBA lines of credit built for working capital needs rather than one-time purchases: seasonal, contract, builders, and working capital lines. Each is tied to a specific cash cycle. The contract line funds labor and materials on a specific awarded contract; the seasonal line funds inventory and payroll ahead of a predictable busy period. They fall under the 7(a) umbrella, so the $5 million ceiling and rate caps apply, with terms up to 10 years.

A streamlined version of the 7(a) program with a faster answer, since the SBA responds to the lender within 36 hours. Maximum loan size is $500,000 and the government guarantee drops to 50%, which is the trade for the speed. Because the lender carries more risk, credit standards can be tighter than standard 7(a). It can be structured as a term loan or a revolving line, and the reduced paperwork is the real advantage for smaller requests.

The Borrower Information Form that every applicant and every owner of 20% or more must complete for an SBA 7(a) loan. It captures ownership, management, citizenship status, criminal history, prior federal debt, and any affiliated businesses. Answers here get verified, and inconsistencies between Form 1919 and your other documents are a common cause of delay. Fill it out carefully the first time, because corrections restart parts of the review.

The federal promise to repay a lender a portion of an SBA loan if the borrower defaults, typically 75% to 85% depending on program and loan size. The guarantee is what makes banks willing to lend to businesses they would otherwise decline, and it is why SBA pricing stays near prime plus a spread rather than alternative-lender territory. Note that it protects the lender, not you: personal guarantees still apply.

An SBA program that funds nonprofit intermediary lenders, who then make loans of up to $50,000 to small businesses and certain childcare centers. Average loans run around $13,000, terms extend up to seven years, and rates typically fall between 8% and 13%. Intermediaries set their own credit criteria and usually require some collateral and a personal guarantee. The funds cover working capital, inventory, supplies, furniture, and equipment, but not real estate or paying off existing debt.

An SBA designation, usually abbreviated PLP, that lets an approved lender make the final credit decision on a 7(a) loan without sending the file to the SBA for review. That authority typically removes weeks from a closing timeline. When comparing SBA lenders, ask directly whether they hold preferred status, because a non-preferred lender adds an SBA review step you will feel in the calendar.

The rulebook governing SBA lending, known as the SOP, which sets eligibility, documentation, collateral, and servicing requirements for every 7(a) and 504 loan. Lenders cannot make exceptions to it, so a denial rooted in the SOP is not negotiable no matter how good your banking relationship is. The SBA revises it periodically, and those revisions can change eligibility, which is why a deal that failed two years ago may work today.

A predictable pattern of revenue rising and falling at the same points each year, common in landscaping, retail, tourism, construction, and tax preparation. Seasonality distorts short-term underwriting: a lender reviewing three months of slow-season bank statements sees a much weaker business than the annual numbers show. Provide twelve months of statements, say plainly when your peak is, and ask about seasonal payment structures rather than a flat daily debit.

A loan backed by specific collateral the lender can seize if you default: real estate, equipment, receivables, inventory, or a blanket lien on business assets. Pledging collateral lowers the lender's risk, which shows up as a lower rate, a longer term, or a larger approval than you would get unsecured. The obvious cost is that the asset is genuinely at stake. Read the lien description carefully, since a blanket UCC filing can block other lenders from funding you later.

The lender or creditor holding a security interest in the borrower's collateral, and the name that appears on the public filing. If you run a search on your own business, the secured parties listed are the ones with a legal claim on your assets. Stale filings from loans you paid off years ago commonly linger, and they must be terminated before a new lender will move forward.

The contract that actually creates a lender's interest in specific collateral, describing what is pledged and what the lender may do if the borrower defaults. It is the legal foundation of the claim, while the public filing is a separate step that puts other creditors on notice. Pay close attention to the collateral description, because vague catch-all language can sweep in far more than you intended to pledge.

An arrangement where the seller of a business accepts a portion of the purchase price as a note paid over time instead of cash at closing. It commonly covers 10%–30% of the price and signals that the seller believes the business will keep performing. In SBA acquisition deals, a seller note on full standby can count toward the buyer's required equity injection. Negotiate the term, rate, and whether payments are subordinate to the bank loan.

An ongoing charge for administering the loan: processing payments, issuing statements, tracking insurance and collateral. It usually appears as a small monthly dollar amount or a fraction of a percent of the balance per year. Individually trivial, it compounds across a 10-year loan into real money. Include it whenever you calculate the true Annual Percentage Rate of a long-term facility.

A lump-sum loan repaid over 3–18 months, usually through daily or weekly payments rather than monthly ones. Approval is fast and credit requirements are moderate, which makes it a common fallback when a bank says no. The cost structure deserves attention: many are quoted as a flat fee or factor rate rather than an APR, so a "1.25 factor" over six months is far more expensive than it sounds. Ask for the annualized number before comparing offers.

Interest calculated only on the outstanding principal, never on previously accrued interest. Most business term loans, equipment financing, and Small Business Administration (SBA) loans work this way. The practical benefit: every extra dollar you put toward principal permanently reduces the interest you will pay later. That is why prepaying a simple-interest loan with no prepayment penalty produces genuine savings, unlike prepaying a factor-rate advance.

The federal agency that guarantees loans made by private lenders to small businesses, rather than lending the money itself in most programs. Its main products are the 7(a) general purpose loan, the 504 for real estate and heavy equipment, and Express for smaller, faster approvals. SBA loans carry the lowest rates most small businesses can access, with variable rates capped at Prime plus 3% to 6.5% depending on loan size (10% to 13.5% at the October 2026 Prime of 7.00%), in exchange for heavier documentation.

The Secured Overnight Financing Rate, a benchmark reflecting the cost of borrowing cash overnight against United States Treasury collateral. It replaced LIBOR as the standard floating-rate index for commercial lending. Bank term loans and commercial real estate debt are often quoted as SOFR plus a spread. Because the daily rate can move, many loan documents reference a 30-day or 90-day average to smooth out volatility, so ask which version your contract uses.

A credit check that does not affect your score and is visible only to you on your report. Lenders use them for prequalification, monitoring, and preapproved offers. When a broker or lender says they can check your options without hurting your credit, this is what they mean. Confirm it in writing before you authorize anything, because some shops describe a hard pull in soft-pull language and you only find out afterward.

A repayment method where your credit card processor diverts an agreed percentage of every card batch to the funder before the remainder reaches your bank account. Split funding is common on merchant cash advances and other card-based products. It differs from a holdback percentage in mechanics: the split happens at the processor level rather than through a debit of your operating account. Switching processors mid-advance usually violates the agreement.

Selling a single invoice, or a small batch, without committing to an ongoing factoring contract. Traditional factoring agreements often require you to submit all receivables for a year or more; spot factoring is a one-off transaction you use when a specific cash gap appears. Flexibility costs more per invoice, since the factor cannot spread underwriting across a full book. It works well for businesses with occasional large invoices from creditworthy customers.

The percentage a lender adds on top of a benchmark index to arrive at your rate. Prime plus 3% at the 7.00% Prime Rate (October 2026) gives you 10%. The spread is where your credit risk gets priced: stronger financials, more collateral, longer time in business, and shorter terms all compress it. You cannot negotiate the index, but the spread is often more negotiable than borrowers assume.

Taking a second or third cash advance on top of an existing one, usually from a different funder who does not know about the first. Nearly every merchant cash advance contract prohibits it and treats it as an event of default, letting the funder accelerate the entire remaining balance immediately. Beyond the legal exposure, two or three daily debits hitting the same deposits will drain an operating account within weeks. If the first advance is already tight, a second one does not buy time; it shortens the runway.

Financing for a business with less than two years of operating history, where there is no revenue track record for a lender to underwrite. Most conventional lenders decline outright, so the realistic options are SBA microloans, community lenders, equipment financing where the asset secures the deal, business credit cards, and personal-credit-based products. Expect the underwriting to fall largely on you: your credit score, your assets, and a personal guarantee. A signed contract or letter of intent from a first customer helps materially.

The specific documents and conditions an underwriter requires before funding, commonly shortened to "stips." Typical ones include additional bank statements, a voided check, driver's license, business license, proof of ownership, landlord verification, or a signed debt schedule. Stips are the most common cause of delay in an otherwise approved file. Getting them back the same day rather than in three days routinely moves funding up a full week.

Debt that ranks behind senior loans for repayment if the business fails or liquidates. The senior lender gets paid in full first, and only then does the subordinated holder see anything. That position commands a higher rate, and it is usually formalized in a subordination agreement the senior bank requires. Seller notes in acquisitions and mezzanine tranches are the most common examples. If you hold subordinated paper, know that a senior lender can often block your payments during a default.

A document in which an existing lender agrees to move behind a new lender in the repayment and collateral line. It is how a business carrying an old blanket filing gets new financing without paying off the first lender. The existing lender is under no obligation to sign, and may charge a fee or simply refuse. Expect the request to add one to three weeks to a closing.

A broad set of programs that free up cash inside the buyer-supplier relationship, letting suppliers get paid earlier while buyers keep or extend their payment terms. Reverse factoring is the best-known form, but the category also includes dynamic discounting and inventory-based structures. The economics work because financing is priced off the stronger party's credit. For a small supplier selling into a large customer, joining one of these programs is usually the cheapest cash acceleration available.

The practice of multiple funders sharing a single deal, each putting up part of the capital and taking a proportional share of repayment. Syndication is routine in merchant cash advance, where it lets smaller funders participate in deals larger than they could carry alone. Borrowers rarely see it happen, but it matters: with several parties in one position, restructuring a struggling advance means getting all of them to agree.

A government claim against your property for unpaid taxes, filed by the IRS or a state or local authority. Tax liens no longer appear on consumer credit reports, but lenders find them in public records and business bureau files. An unresolved federal tax lien blocks SBA financing and most bank lending outright. A documented IRS installment agreement with a payment history often reopens the door, so set one up before you apply.

A non-binding summary of the key terms a lender or investor is proposing, issued before full documentation. It should state the amount, rate, term, amortization, collateral, guarantees, fees, and any covenants or conditions to closing. Treat it as the moment to negotiate, because terms harden once legal drafting starts. Read the conditions precedent closely, since that section is where a clean-looking offer can quietly depend on an appraisal, an audit, or a third-party payoff.

A charge for exiting a facility before the contract term expires, common in invoice factoring agreements and equipment leases. Factoring contracts often run 12 months with automatic renewal and charge a percentage of the monthly minimum for every remaining month. Just as important is the notice window: many agreements require 30 to 60 days written notice, and missing it rolls you into another full term.

A credit report with too little history for scoring models to judge you reliably, usually fewer than three or four trade lines or less than a couple of years of activity. It is not the same as bad credit, but underwriters often treat it similarly because there is nothing to predict from. Newer businesses and owners who have avoided debt land here constantly. Two or three reporting accounts paid on time fill it in within a year.

How long your business has been operating, usually measured from the incorporation or EIN date rather than from when you started working. It is a threshold requirement almost everywhere. Revenue-based products generally require 3–6 months, online term lenders want a year or more, and banks and SBA lenders typically want 2+ years. Buying a business with an existing entity can inherit that history, while restructuring into a new entity resets the clock.

A policy protecting the lender, and optionally the buyer, against defects in the ownership history of real property: unpaid liens, forged signatures, boundary errors, or missed heirs. It is required on essentially every commercial mortgage. The premium is paid once at closing rather than annually, and it scales with the loan amount, commonly running a few thousand dollars on a typical commercial property.

Every dollar you pay above the amount you actually receive, including interest, origination, servicing, closing costs, and any prepayment charge. Rates can be dressed up in different languages; total dollars cannot. A $50,000 advance repaid at $67,500 costs $17,500, whether it is described as a 1.35 factor, a 35% fee, or 74 cents on the dollar. Ask every lender for the total dollar cost and the Annual Percentage Rate, then compare.

Any individual credit account on a report, whether a card, loan, lease, or vendor account, showing the limit, balance, and payment history. Business trade lines are what build business credit, and they only count if the vendor reports to a bureau. Many suppliers do not. Opening a handful of accounts with vendors that report to Dun & Bradstreet and Experian Business is the cheapest way to build a business file from nothing.

The public claim on a business's assets that results from a lender's filing, and what appears when anyone searches your entity with the Secretary of State. Priority runs by filing date, so the first lender in line gets paid first out of the collateral. An open lien from a loan you already paid off will block new financing until it is terminated, so search yourself before applying.

The one-page form a lender submits to the Secretary of State under the Uniform Commercial Code to make its security interest public and enforceable against other creditors. It names the debtor, the secured party, and the collateral. Fees are small, usually $10 to $50, and the filing stays effective for five years unless continued. Signing a loan does not create the public record; this filing does.

The person who evaluates your application and decides whether the lender takes the risk. They read the credit report, the bank statements, the financials, and the story, and they weigh it against the lender's credit box. Underwriters are not adversaries. A clean, complete, well-explained file makes their job easy, and an easy file gets approved faster and often on better terms than a messy one with identical numbers.

The evaluation process a lender runs to decide whether to fund you, at what amount, and on what terms. Depth varies enormously by product: revenue-based underwriting can run largely from bank statements in a day, while SBA underwriting involves tax returns, financials, projections, collateral analysis, and often a credit committee over several weeks. Knowing which kind of review you are heading into tells you what to prepare and how long to expect it to take.

A charge covering the lender's cost of evaluating your application: pulling credit, verifying financials, ordering appraisals, and assessing collateral. It is typically a flat amount ranging from a few hundred dollars on a small loan to several thousand on a complex one. Some lenders collect it upfront and keep it even if you are declined. Ask whether it is refundable and whether it is due at application or at closing.

A loan approved without specific collateral pledged against it. That does not mean nothing is at risk: nearly all of these require a personal guarantee, and many include a blanket UCC lien on business assets, which functions as collateral in practice. Rates are higher and amounts smaller than secured alternatives, typically topping out in the low six figures. It is a reasonable choice when you have strong revenue and credit but no clean asset to pledge.

A plain statement of what you intend to do with the money, required on nearly every serious loan application and always on SBA files. Lenders match use to product: inventory and payroll gaps fit a line of credit, a machine fits equipment financing, an acquisition fits a term loan. Vague answers like "growth" invite scrutiny. Specific ones, with dollar amounts by category, move the file along faster.

Lending at an interest rate above the legal maximum a state permits. Business loans generally face higher ceilings than consumer loans, and many states exempt commercial borrowing entirely. Merchant cash advances are structured as purchases of future receivables rather than loans, which is the legal reasoning that keeps factor rates outside usury caps. Courts have tested that structure repeatedly. Judge an offer by its cost, not by whether it is technically legal.

A rate tied to a moving benchmark such as Prime or the Secured Overnight Financing Rate, so your payment changes as the index changes. Most Small Business Administration (SBA) 7(a) loans and nearly all lines of credit are variable. At the 7.00% Prime of October 2026, a Prime plus 3% loan sits at 10%, and a one-point move in Prime moves your payment with it. Ask whether the loan has a rate cap or floor.

Loans made to venture-backed companies, usually alongside or shortly after an equity round. Lenders underwrite the quality of the investors and remaining runway rather than profitability, since these companies are often losing money by design. Facilities typically run 20%–35% of the last round's size, carry warrants for a small equity stake, and include interest-only periods. The appeal is extending runway without another round of dilution. The risk is a covenant tripping when the next round takes longer than planned.

A blank check from the business account with the word VOID written across it, used to confirm the routing and account numbers for ACH transfers. Lenders need it to deposit funds and to set up automatic payments. If your account does not come with checks, a bank letter on letterhead or a direct deposit form serves the same purpose. Never send a check with an amount printed on it.

A fixed amount debited once per week, common on short-term online loans and some merchant cash advances. It is easier on cash flow than daily debits but still means 52 payments a year, so the annual outflow is higher than an equivalent-looking monthly structure. Match payment frequency to how your receipts actually arrive: a business paid on net-30 terms is poorly served by weekly debits.

A charge for delivering funds by wire transfer rather than Automated Clearing House, usually $20 to $50, and frequently deducted from your proceeds so you net slightly less than approved. The dollar amount is trivial. The signal is not. A lender who itemizes small charges clearly is more likely to be straight with you about the large ones.

Current assets minus current liabilities, the cushion of short-term resources available to cover short-term obligations. Positive working capital means the business can fund the next few months of operations from what it already holds. Negative working capital means it cannot, and that gap has to be closed by faster collections, slower payments, or borrowed money. Lenders track the trend closely, since shrinking working capital usually precedes a missed payment.

Financing used to cover day-to-day operating expenses such as payroll, rent, inventory, and supplier payments, rather than long-term assets. Terms are short, generally 6–24 months, because the money is meant to bridge a cash cycle and not to fund permanent growth. The right diagnosis matters here: if the shortfall is seasonal or tied to slow-paying customers, this fits well. If the business is losing money every month, more debt makes the problem larger, not smaller.