Glossary

Business Financing Glossary: Plain-Language Definitions

28 business financing terms in plain language, from "factor rate" to "UCC lien". Each definition is short enough to read in a few seconds and links to the full guide.

Last updated October 9, 2026

Accounts receivable financingalso: AR financing: Financing that uses your outstanding invoices as collateral for a credit facility or advance. Unlike factoring, you keep ownership of the invoices and collect from your customers yourself. Read the full guide
Annual percentage rate (APR)also: APR: The yearly cost of a loan including interest and fees, shown as a percentage. Because it counts fees, APR lets you compare loans that have different rates and fee structures. Read the full guide
Asset-based financingalso: asset-based lending, ABL: A revolving credit facility secured by business assets, mainly accounts receivable but also inventory and equipment. As your receivables grow, your available credit grows. Read the full guide
Blanket lien: A lien that covers all or most of a business's assets instead of one specific item. A lender may file one even on a loan described as unsecured, so read the lien terms before you sign. Read the full guide
Business line of creditalso: revolving credit line: A revolving credit limit you draw from as needed, repay, and draw from again. You pay interest only on the amount you have drawn. Read the full guide
Collateral: An asset, such as equipment, receivables or real estate, that a lender can claim if a loan is not repaid. Secured loans are backed by collateral; unsecured loans are not. Read the full guide
Debt service coverage ratio (DSCR)also: DSCR: The money your business has available to pay debts divided by the total of your debt payments. Many lenders look for roughly 1.25 or higher, meaning the business brings in about a quarter more than its payments require. Read the full guide
Equipment financingalso: equipment loan: A loan used to buy business equipment, with the equipment itself serving as collateral. Terms are matched to the equipment's useful life, and you own the equipment when it is repaid. Read the full guide
Equipment lease: An agreement to use equipment for a set period in exchange for regular payments. Payments are usually lower than a loan's, and you typically return, upgrade or, if the lease allows, buy the equipment at the end. Read the full guide
Factor rate: A decimal multiplier used on short-term loans and merchant cash advances instead of an interest rate. It sets the total repayment upfront: a 1.3 factor rate on $100,000 means you repay $130,000, however long repayment takes. Read the full guide
Hard credit pullalso: hard inquiry: A credit check made when you formally apply with a lender. It is recorded on your credit report and can lower your score slightly, unlike a soft pull. Read the full guide
Invoice factoring: Selling your outstanding invoices to a factoring company at a discount in exchange for immediate cash. The factor collects from your customers, then pays you the remainder, minus its fee, when they pay. Read the full guide
Long-term business loan: A loan repaid over several years instead of months, which lowers each payment but usually costs more in total. On the lendfloCapital network, business term loans run about 12 to 60 months. Read the full guide
Merchant cash advancealso: MCA: An advance of cash that is repaid from a share of future sales, usually daily or weekly. It is priced with a factor rate rather than an interest rate and is typically structured as a purchase of future sales, not a loan. Read the full guide
Origination fee: A one-time charge for processing and underwriting a loan. It is often taken out of the money you receive, so you repay more than you get. Read the full guide
Personal guarantee: A legal commitment by a business owner to personally repay a loan if the business cannot. It ties your personal finances to the business debt. Read the full guide
Prepayment penalty: A charge for paying a loan off early. Some loans have none, and some reduce the total owed when you pay early, so ask before you accept an offer. Read the full guide
Revenue-based financingalso: RBF: Capital repaid as a percentage of future revenue until a set total is reached. Unlike a term loan's fixed payments, payments adjust with your revenue, so slower months mean lower payments. Read the full guide
SBA 504 loan: Long-term, fixed-rate financing for major fixed assets such as buildings, land and long-lived equipment. It is provided through Certified Development Companies, and cannot be used for working capital or inventory. Read the full guide
SBA 7(a) loan: The U.S. Small Business Administration's main loan program, with loans up to $5 million. The SBA guarantees part of a loan made by a participating lender; it does not lend directly to borrowers. Read the full guide
Section 179 deduction: A tax provision that can let a business deduct the full cost of qualifying equipment in the year it is placed in service, including financed equipment. Annual limits and eligibility rules apply, so confirm the details with your accountant. Read the full guide
Secured loan: A loan backed by collateral, such as equipment or business assets, that the lender can claim if the loan is not repaid. Because the lender can recover value, secured loans often cost less. Read the full guide
Short-term business loan: A lump sum repaid over a short period, typically about 3 to 18 months on the lendfloCapital network, with fixed payments. It suits a defined cash need and can cost more per year than a longer-term loan. Read the full guide
Soft credit pullalso: soft inquiry: A credit check that does not affect your credit score. It is used to see which offers you may qualify for before a lender runs a formal, hard check. Read the full guide
Term loanalso: business term loan: A fixed lump sum repaid in scheduled installments over a set period, typically about 12 to 60 months on the lendfloCapital network. Rates and payments are fixed, so budgeting is predictable. Read the full guide
UCC lienalso: UCC-1 filing: A public notice that a lender has a security interest in your business assets. It does not give the lender possession of the assets; it creates a legal priority if you default. Read the full guide
Unsecured loan: A loan with no specific collateral, decided on revenue, time in business, credit and cash flow. Lenders often ask for a personal guarantee, and the cost is often higher because they carry more risk. Read the full guide
Working capital loan: Short-term financing for day-to-day operating needs such as payroll, inventory and supplier invoices. It is designed for speed and repays quickly, typically over about 3 to 18 months. Read the full guide