Lenders and providers use a lot of jargon. Here is what the most common terms mean, in one or two sentences each. Still unsure? Call or text us, or book a free 20-minute call. No question is too basic.
- Broker vs. lender
- A lender provides the money and makes the decision. A broker, like Natural Lending Co, helps you compare options from several lenders and guides you through the process.
- Total payback
- Everything you will pay back, start to finish, including fees. The simplest way to compare two offers fairly.
- Working capital
- Money a business uses to run day to day: payroll, inventory, rent and repairs.
- Merchant cash advance (MCA)
- Money now in exchange for a share of your future sales. Repaid from sales or with fixed daily or weekly payments. Not a traditional loan.
- Factor rate
- A number some providers use to show cost. Multiply it by the amount you receive to see the total payback.
- Line of credit
- A set amount you can draw from when you need it, and use again as you pay it down.
- Syndicated line of credit (SLOC)
- Credit lines arranged across several lenders, usually built around the owner's personal credit.
- Revenue-based financing
- Funding sized around your business deposits and revenue rather than mainly your credit score.
- Receivables / invoices
- Money your customers owe you for work already done.
- Invoice factoring
- Selling unpaid invoices to a company that gives you cash now and collects from your customer.
- Collateral
- Something of value, like equipment or property, that helps secure the financing.
- Personal guarantee
- A promise that you, the owner, will repay if the business cannot. Always ask whether an offer includes one.
- UCC filing (lien)
- A public notice a lender files to show it has a claim on certain business assets until it is repaid.
- Soft vs. hard credit pull
- A soft pull lets someone view your credit without affecting your score. A hard pull happens when you formally apply for credit and can show on your report.
- Time in business
- How long the business has been operating, usually counted from when it was formed or started taking revenue.
- SBA loan
- A loan made by an approved lender and partly backed by the U.S. Small Business Administration. Usually more paperwork and time, with longer terms.
- DSCR
- Debt service coverage ratio. For rentals, it checks whether the property's income covers the payment.
- HELOC
- A home equity line of credit, which borrows against the equity in your home.
- Pre-revenue
- A business that has not made sales yet.
