[Get Funded]The most comprehensive glossary of 281+ business funding and loan terms. Whether you're comparing SBA loans, understanding MCA factor rates, or learning what DSCR means, this searchable reference helps you speak the language of business financing with confidence.
Business financing comes with its own vocabulary. Terms like APR, factor rate, DSCR, and UCC filing can be confusing, but understanding them is essential for making smart funding decisions. The difference between a factor rate of 1.25 and 1.45 on a $100,000 advance is $20,000—knowledge that could save your business thousands.
This glossary covers everything from basic concepts like interest rates and collateral to advanced topics like debt service coverage ratios and subordination agreements. Use the search bar to find specific terms, or browse by category to learn about different aspects of business financing.
Showing 281 terms
APR (Annual Percentage Rate) is the total yearly cost of borrowing, including both the interest rate and fees, expressed as a percentage. APR allows you to compare the true cost of different loans on an apples-to-apples basis. For example, a loan with 10% interest plus 2% in fees might have an APR of 12-13%. This makes APR more useful than just looking at the interest rate alone.
A factor rate is a multiplier used to calculate the total repayment amount for merchant cash advances (MCAs) and some short-term loans. Unlike APR, factor rates don't account for time—you pay the same total amount whether you repay in 3 months or 12 months. For example, a $50,000 advance with a 1.35 factor rate means you'll repay $67,500 total ($50,000 × 1.35). This makes comparing MCAs to traditional loans difficult without converting to an equivalent APR.
DSCR (Debt Service Coverage Ratio) measures your ability to pay debt obligations. It's calculated by dividing your Net Operating Income by your Total Debt Payments. Lenders typically require a DSCR of 1.25x or higher, meaning your business generates 25% more income than needed to cover debt payments. A DSCR of 1.0 means you barely cover your debts with no cushion, while below 1.0 means you don't generate enough to cover your debts.
A UCC (Uniform Commercial Code) filing is a legal document that gives a lender a claim on your business assets as collateral. It's a public record that other lenders can see. While not inherently bad—most business loans involve some form of UCC filing—a blanket UCC lien covers all your current and future assets, which can limit future financing options. Always understand exactly what assets are being liened before accepting financing.
A term loan provides a lump sum upfront that you repay with fixed payments over a set period (the "term"). A line of credit is flexible—you can borrow up to your limit, repay, and borrow again, only paying interest on what you actually use. Term loans are better for one-time purchases like equipment or real estate; lines of credit are better for ongoing working capital needs and managing cash flow fluctuations.
A personal guarantee is a legal promise that you'll personally repay the loan if your business can't. This makes you personally liable for business debt, putting your personal assets (home, savings, etc.) at risk. Most small business loans require some form of personal guarantee. An "unlimited" personal guarantee has no cap, while a "limited" guarantee caps your liability at a specific amount or percentage.