A
Accounts Payable
Money owed by a business to its suppliers.
Accounts Receivable
Money owed to a business by its customers.
Amortization
The process of spreading out a loan into a series of fixed payments.
Annual Percentage Rate (APR)
The annual cost of a loan to a borrower, including fees.
Assets
Resources owned by a business with economic value.
B
Balloon Payment
A large, lump-sum payment scheduled at the end of a series of smaller periodic payments.
Bankruptcy
Money owed to a business by its customers.
Borrower
The process of spreading out a loan into a series of fixed payments.
Business Credit Score
A numerical expression based on an analysis of a business’s credit files.
Business Line of Credit
A flexible loan from a bank that has a defined amount of money that you can access as needed and repay either immediately or over time.
C
Capital
Wealth in the form of money or assets owned by a business.
Cash Advance
Money owed to a business by its customers.
Cash Flow
The total amount of money being transferred in and out of a business.
Collateral
An asset that a borrower offers to a lender to secure a loan.
Compound Interest
Interest on a loan or deposit calculated based on both the initial principal and the accumulated interest.
D
Debt
Money owed by one party to another.
Debt Financing
Money owed to a business by its customers.
Default
Failure to repay a loan according to the terms agreed to.
Depreciation
The decrease in the value of an asset over time.
Down Payment
An initial payment made when something is bought on credit.
E
Equity
The value of the shares issued by a company.
Equity Financing
Raising capital through the sale of shares.
Equipment Financing
Loans or leases used to purchase or borrow hard assets for a business.
Escrow
A financial arrangement where a third party holds funds until conditions are met.
F
Factoring
A financial transaction where a business sells its accounts receivable to a third party at a discount.
FICO Score
A type of credit score created by the Fair Isaac Corporation.
Finance Charge
The total amount of interest and loan charges you would pay over the entire life of the loan.
Fixed Interest Rate
An interest rate that remains the same for the entirety of the loan period.
Foreclosure
The process by which a lender takes control of a property due to unpaid debts.
G
Grace Period
A set period of time after the due date during which a payment can be received without penalty.
Gross Income
Total revenue from sales before any expenses are deducted.
I
Installment Loan
A loan that is repaid over time with a set number of scheduled payments.
Interest
The charge for the privilege of borrowing money.
Interest Rate
The proportion of a loan that is charged as interest to the borrower.
Invoice Factoring
A process where a business sells its invoices at a discount to get immediate cash.
L
Lender
An organization or person that lends money.
Liability
A company’s financial debt or obligations that arise during business operations.
Lien
The right to keep possession of property belonging to another person until a debt is paid.
Line of Credit
An arrangement between a financial institution and a customer that establishes a maximum loan balance that the lender permits the borrower to access.
Liquid Assets
Cash or assets that can be quickly converted to cash.
M
Maturity Date
The final payment date of a loan.
Merchant Cash Advance
A financing option that provides a business with a lump sum in exchange for a percentage of future credit/debit card sales.
Minimum Payment
The smallest amount of a credit card bill that a credit card holder can pay.
N
Net Income
A company’s total earnings, also called net profit.
Net Worth
The difference between the assets and liabilities of a person or business.
Non-Recourse Factoring
A type of factoring where the factor assumes most of the risk of non-payment.
O
Operating Capital
The cash used for daily operations in a business.
Origination Fee
A fee charged by a lender for processing a new loan application.
P
Principal
The amount of money borrowed or the amount of money still owed on a loan.
Profit
The financial gain when the revenue gained from a business activity exceeds the expenses, costs, and taxes.
Promissory Note
A financial instrument that contains a written promise by one party to pay another party a definite sum of money.
R
Receivables
Money owed to a company by its clients or customers.
Refinancing
The process of replacing an existing loan with a new loan, typically with better terms.
Repayment Term
The length of time borrowers have to pay back a loan.
Revolving Credit
A line of credit where the customer pays a commitment fee to a financial institution to borrow money and is then allowed to use the funds when needed.
S
Secured Loan
A loan where the borrower pledges some asset as collateral for the loan.
Short-Term Loan
A loan scheduled to be repaid in less than a year.
Subprime Loan
A loan offered to individuals who do not qualify for prime rate loans.
T
Term Loan
A bank loan for a specific amount that has a specified repayment schedule and a fixed or floating interest rate.
Total Cost of Capital
The total amount of funds that a business must provide to finance its operations and growth.
V
Variable
W
Working Capital
The capital used in day-to-day trading operations, calculated as current assets minus current liabilities.
Working Capital Loan
A loan used to finance the everyday operations of a business, rather than to buy long-term assets or investments.