Here’s a glossary of 100 business loan terms to help you navigate the world of business financing:
Amortization: The process of paying off a loan through regular, equal payments over time.
Angel Investor: A high-net-worth individual who provides capital to startups in exchange for equity.
Annual Percentage Rate (APR): The total cost of borrowing, expressed as a percentage, including interest and fees.
Assets: Everything a business owns, including cash, equipment, and property.
Balance Sheet: A financial statement showing a business’s assets, liabilities, and equity at a specific point in time.
Bankruptcy: A legal process when a business is unable to repay its debts, resulting in reorganization or liquidation.
Bootstrapping: Funding a business using personal savings or revenue without external financing.
Borrower: The entity or individual receiving a loan.
Bridge Loan: A short-term loan used to cover financial gaps until more permanent financing is secured.
Business Credit Score: A numerical representation of a business’s creditworthiness.
Capital: Money used to invest in or run a business.
Collateral: An asset pledged as security for a loan.
Commercial Mortgage: A loan to purchase or refinance commercial real estate.
Convertible Loan: A debt that can be converted into equity at a later date.
Credit Report: A document detailing an individual’s or business’s credit history.
Creditworthiness: A measure of an individual’s or business’s ability to repay debts.
Debt Financing: Raising capital through loans, with the obligation to repay borrowed funds plus interest.
Default: Failure to meet loan repayment terms.
Depreciation: The decrease in value of assets over time.
Disbursement: The release of loan funds to the borrower.
Due Diligence: Thorough research and analysis conducted before lending or investing.
Equity: Ownership in a business.
Fixed Interest Rate: An interest rate that remains constant throughout the loan term.
Funding Round: A specific stage of fundraising in a startup’s growth.
Guarantor: An individual or entity that guarantees loan repayment if the borrower defaults.
Incubator: An organization that provides support and resources to startups.
Initial Public Offering (IPO): The first sale of stock by a company to the public.
Interest Rate: The cost of borrowing money, expressed as a percentage.
Invoice Financing: A loan using outstanding invoices as collateral.
Lender: An entity or individual providing a loan.
Liabilities: Debts and obligations a business owes.
Line of Credit: A flexible credit arrangement allowing borrowing up to a set limit.
Loan Agreement: A legal contract outlining loan terms.
Maturity Date: The date when a loan must be repaid in full.
Microloan: A small loan, often for startups and small businesses.
Mortgage: A loan to purchase real estate, typically with the property as collateral.
Net Income: Total revenue minus expenses.
Personal Guarantee: An individual’s promise to repay a business loan if the business defaults.
Portfolio: A collection of loans or investments held by an individual or institution.
Prepayment Penalty: A fee for repaying a loan before its maturity date.
Principal: The initial loan amount borrowed.
Private Equity: Investment in private companies in exchange for equity.
Profit and Loss Statement (P&L): A financial statement showing a business’s revenue and expenses over a period.
Refinancing: Replacing an existing loan with a new one, often with better terms.
Repayment Schedule: A plan outlining when and how loan payments are due.
Revenue: Income generated by a business.
SBA Loan: A loan guaranteed by the Small Business Administration (SBA) in the United States.
Secured Loan: A loan backed by collateral.
Seed Capital: Initial funding to start a business or develop a product.
Term Loan: A loan with a fixed amount and repayment period.
Underwriting: The process of evaluating loan applications.
Unsecured Loan: A loan without collateral.
Venture Capital: Investment in startups and high-growth companies in exchange for equity.
Working Capital: Funds available for daily business operations.
Accounts Payable: Money owed by a business to suppliers or vendors.
Accounts Receivable: Money owed to a business by customers.
Amortization Schedule: A table showing loan payments over time.
Asset-Based Lending: A loan secured by specific assets.
Balloon Payment: A large final loan payment.
Bank Statement Loan: A loan based on bank statements, not tax returns.
Business Credit Card: A credit card for business expenses.
Cash Flow: The movement of money in and out of a business.
Collateralized Debt Obligation (CDO): A complex financial product backed by various loans.
Corporate Bonds: Debt securities issued by corporations.
Credit Line: Synonymous with a line of credit.
Default Rate: The rate at which borrowers fail to repay loans.
Direct Lender: A lender that provides loans directly to borrowers.
Distressed Loan: A loan in default or at risk of default.
Equity Crowdfunding: Raising capital by selling shares to a large number of investors.
Fixed Assets: Long-term assets such as property and equipment.
Foreclosure: The process of repossessing collateral, often in the case of a defaulted mortgage.
Grantee: The entity receiving a grant.
Grantor: The entity providing a grant.
Gross Profit: Total revenue minus the cost of goods sold.
Hard Money Loan: A short-term, high-interest loan often used in real estate.
Initial Loan Fee: A fee charged when a loan is first established.
Joint Venture: A business arrangement between two or more parties for a specific project or purpose.
Lien: A legal claim on collateral until a debt is repaid.
Loan Origination Fee: A fee charged by a lender for processing a loan application.
Mezzanine Financing: A hybrid form of financing combining debt and equity.
Negative Amortization: When loan payments do not cover the full interest, resulting in a growing loan balance.
Operating Expenses: Costs associated with running a business.
Partnership: A business structure involving two or more individuals or entities.
Personal Financial Statement: A document detailing an individual’s financial position.
Prime Rate: The interest rate banks charge their most creditworthy customers.
Principal and Interest (P&I): Loan payments that cover both the loan amount and interest.
Private Placement: The sale of securities to a select group of investors.
Promissory Note: A legal document outlining the terms and conditions of a loan.
Receivables Financing: Another term for invoice financing.
Revolving Credit: A credit arrangement with a preset limit and continuous access.
Secured Line of Credit: A line of credit backed by collateral.
Term Sheet: A preliminary agreement outlining the terms of a loan or investment.
Unsecured Line of Credit: A line of credit without collateral.
Venture Capitalist (VC): An individual or firm that invests in startups and high-growth companies.
Working Capital Loan: A loan to cover short-term business expenses.
Yield: The return on investment from a loan or investment.
Zero-Down Loan: A loan that requires no down payment.
Accrued Interest: Interest that accumulates on a loan but is not yet paid.
Bankruptcy Chapter 7: A form of bankruptcy involving liquidation of assets to pay off debts.
Convertible Preferred Stock: A type of stock that can be converted into common stock.
This glossary covers a wide range of business loan terms, offering a comprehensive reference for those involved in business financing and lending.