Business loan glossary
Plain-English definitions for every term lenders use.
Last reviewed: by the Simply Approved Business Loans editorial team.
Annual Percentage Rate (APR)
The annualized cost of a loan including interest and fees. Use APR — not interest rate alone — to compare loans of different terms.
Factor Rate
Used in MCAs and short-term financing instead of APR. A factor of 1.30 on $100,000 means you repay $130,000 total.
Merchant Cash Advance (MCA)
A sale of future receivables. The funder advances a lump sum and collects a percentage of daily or weekly deposits until a fixed total is repaid.
ACH Remittance
Automated Clearing House withdrawals — the daily, weekly, or monthly debit a funder uses to collect MCA or working capital payments.
EIN
Employer Identification Number. The IRS-issued tax ID for a US business; required for funding.
CRA Business Number
Canada Revenue Agency's tax ID for Canadian businesses; required for Canadian funding.
FICO Score
Personal credit score from 300–850. Most US business funding considers personal FICO of the 20%+ owners.
Personal Guarantee
A signed promise that an owner will personally repay the loan if the business cannot. Standard on most small business loans.
UCC-1 Filing
A public lien notice filed by a lender on business assets. Standard on most business loans over $50,000.
Debt Service Coverage Ratio (DSCR)
Net operating income divided by debt payments. A DSCR of 1.25+ is typically required for SBA and CRE loans.
Loan-to-Value (LTV)
Loan amount divided by collateral value. Conventional CRE caps at 75% LTV; SBA 504 reaches 90%.
SBA 7(a)
The SBA's flagship guaranteed business loan — up to $5,000,000 with terms to 25 years.
SBA 504
An SBA loan for owner-occupied real estate and major equipment, with as little as 10% down.
Working Capital
Cash a business uses for day-to-day operations — payroll, rent, inventory. Working capital loans fund this purpose.
Receivables
Unpaid customer invoices. Used as collateral or sold (factored) for immediate cash.
Recourse vs Non-Recourse
Recourse means the lender can collect from the borrower if a customer doesn't pay; non-recourse means the lender absorbs that risk for a higher fee.
Section 179
An IRS rule allowing businesses to deduct the full cost of qualifying equipment in the year purchased, up to limits.
Time in Business (TIB)
Months since legal entity formation. Most products require 4+; SBA requires 24+.
PAYDEX Score
Dun & Bradstreet's business credit score, 0–100. 80+ indicates payments on or before due date.
Factor (Factoring Company)
A company that buys outstanding invoices for immediate cash, then collects from your customer.
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