The plain-English dictionary of business funding.
Every term every small-business operator should know, defined without the jargon and without the upsell.
ACH
Automated Clearing House — the U.S. electronic funds transfer network used to move money between bank accounts. In small-business funding, ACH is the standard mechanism for daily or weekly repayment debits on merchant cash advances and most term loans.
Advance
In alternative business finance, an 'advance' refers to a merchant cash advance or working-capital advance — capital provided in exchange for a fixed dollar amount of future revenue, repaid through daily or weekly ACH debits.
APR
Annual Percentage Rate — the standardized annualized cost of borrowing, expressed as a percentage of principal per year. APR is required disclosure on consumer loans and most regulated business loans.
AR Financing
Accounts receivable financing — an umbrella term for working capital advanced against outstanding B2B invoices. Includes invoice factoring and invoice financing.
Bridge Loan
Short-term financing designed to cover a gap between two events — typically a current capital need and a future, defined source of capital that will pay off the bridge. 3 to 18 months.
Cash Flow
The net movement of cash into and out of a business over a defined period. Distinct from profit — a business can be profitable on paper while running negative cash flow.
Collateral
A specific asset pledged as security for a loan. Common business loan collateral includes commercial real estate, business equipment, vehicles, inventory, accounts receivable, and intellectual property.
EIN
Employer Identification Number — the federal tax ID issued by the IRS that identifies a business entity for tax and reporting purposes.
Factor Rate
A multiplier used to express the total cost of a merchant cash advance. A factor rate of 1.30 on a $100,000 advance means the borrower repays $130,000 total.
FICO
The credit scoring model developed by Fair Isaac Corporation and used by most U.S. lenders to assess personal creditworthiness. Scores range 300–850.
Holdback
The percentage of daily revenue a merchant cash advance funder collects until the purchased amount is paid down. Typically 8–20% of daily card volume.
Line of Credit
A revolving credit facility that lets a borrower draw, repay, and re-draw funds up to a maximum approved limit. Interest accrues only on the drawn balance.
MCA (Merchant Cash Advance)
A working-capital instrument structured as a purchase of future receivables. Same-day capital available; cost expressed as a factor rate.
NSF
Non-Sufficient Funds — a banking term used when a check or ACH debit is returned because the account doesn't have enough money. NSF count is a critical underwriting variable.
Personal Guarantee
A contractual promise from a human signer to be personally responsible for a business debt if the business fails to pay. Nearly universal in small-business lending.
SBA 7(a)
The Small Business Administration's flagship loan-guaranty program. Up to $5M, terms up to 25 years on real estate. 45–90 day timeline.
Stacking
Taking on multiple merchant cash advances simultaneously. Contractually prohibited by most MCA agreements and a major default risk.
Term Loan
A fixed-payment loan with a defined maturity date, interest rate, and amortization schedule. The most familiar small-business credit structure.
UCC Filing
A public-record financing statement filed under the Uniform Commercial Code that gives notice of a creditor's security interest in business collateral.
Underwriting
The process by which a lender evaluates a borrower's creditworthiness, the proposed use of funds, the available collateral, and the overall risk of the transaction.
Working Capital
The cash a business needs to fund day-to-day operations — payroll, rent, inventory, utilities, supplier payments, marketing.
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