Business Funding Glossary

An electronic network used for bank-to-bank transfers in the U.S. Many short-term lenders collect daily or weekly repayment via scheduled ACH debits from a business checking account.

The process of paying off a loan through scheduled, fixed payments that cover both principal and interest over a set term, with each payment reducing the balance.

The yearly cost of borrowing expressed as a percentage, including interest and certain fees. APR allows apples-to-apples comparison across loan products — unlike a factor rate.

A legal claim filed by a creditor establishing security interest in all general assets of a business entity.

A revolving credit facility that allows business owners to borrow up to a set limit, repay, and borrow again.

An asset — such as equipment, real estate, inventory, or accounts receivable — pledged to secure a loan. If the borrower defaults, the lender can seize the collateral.

A single new loan used to pay off multiple existing debts, often taken to reduce daily payment burden or combine several merchant cash advances into one manageable payment.

An individual or entity that agrees to repay a loan if the primary borrower defaults. A personal guarantee is a common form of guarantor commitment in business lending.

A measurement of available cash flow to pay current debt obligations: Net Operating Income / Total Debt Service.

Failure to meet the legal obligations of a loan agreement, such as missing payments. Default can trigger penalties, acceleration of the full balance, or seizure of collateral.