Loan Glossary

A form of business lending where outstanding customer invoices serve as collateral. The lender advances 70%–90% of the invoice value immediately, then collects from the customers.

A revolving credit facility allowing a business to borrow up to a set limit, repay, and borrow again. More flexible than a term loan, with interest charged only on amounts drawn.

A lump-sum loan repaid over a fixed period (1–10+ years) with regular payments. Best for specific, one-time capital needs like equipment purchases or expansion.

A loan or lease specifically to purchase business equipment. The equipment serves as collateral. Terms typically match the useful life of the equipment (3–7 years).

Selling outstanding invoices to a third party (factor) at a discount in exchange for immediate cash. Unlike AR financing, the business sells the receivables rather than using them as collateral.

A revolving line of credit or loan secured by a business's inventory. Allows businesses to purchase inventory without depleting cash. Common in retail and manufacturing.

An advance against future credit card or debit card sales. Repaid automatically as a percentage of daily sales. Extremely expensive (factor rates of 1.2x–1.5x) — use only as a last resort.

Financing for businesses with little or no operating history. Options include SBA microloans, business credit cards, CDFI loans, personal loans, or equipment financing. Harder to qualify for without revenue history.

The funds used to cover day-to-day operational expenses — payroll, inventory, rent, utilities. Working capital loans help businesses bridge cash flow gaps.