Business Funding Glossary

Plain-English definitions of the terms you will see in funding offers.

Factor rate

A multiplier used to price merchant cash advances and some short-term financing. A $50,000 advance at a 1.30 factor rate has a total payback of $65,000.

Total payback

The full amount you will repay or remit, including all costs. Always compare offers by total payback and term, not just by payment size.

Remittance

The daily or weekly amount sent to a merchant cash advance provider from your sales or bank account.

Holdback

The percentage of daily card sales withheld to repay a split-funded merchant cash advance.

Reconciliation

A process in many merchant cash advance agreements that adjusts remittances to match your actual sales if revenue drops.

Stacking

Taking a new advance or loan while an existing one is still being repaid. Heavy stacking is a common cause of cash-flow trouble.

Consolidation

Combining several existing advances or loans into one new obligation, ideally with a lower daily or weekly payment.

Annual percentage rate (APR)

The yearly cost of financing including fees, expressed as a percentage. Useful for comparing loans of different lengths.

Origination fee

A one-time fee charged by some lenders for processing a loan, often deducted from the funds you receive.

Personal guarantee

A promise by a business owner to be personally responsible if the business does not perform under the agreement.

UCC filing (UCC-1)

A public notice that a funder has a security interest in business assets. Most business financing involves one.

Collateral

Assets pledged to secure financing, such as equipment, receivables or real estate.

Invoice factoring

Selling unpaid customer invoices to a factoring company for immediate cash, minus a fee.

Purchase order financing

Funding paid to your supplier so you can fulfill a confirmed customer order.

Revolving line of credit

A credit limit you can draw on, repay and reuse, paying only on the balance you use.

SBA loan

A loan from an approved lender partially guaranteed by the U.S. Small Business Administration, usually with longer terms and a longer approval process.

Time in business

How long your business has been operating, usually measured from its first bank deposits or formation date.

Average daily balance

The average amount in your business bank account each day. Funders use it to judge whether you can handle payments.

NSF (non-sufficient funds)

A returned payment because the account did not have enough money. Frequent NSFs reduce approval odds.

ISO (independent sales organization)

A broker or sales company that refers businesses to funders and is paid a commission when a deal funds.