Business Financing Definitions

Find some common financing and commercial loan terms here.

Terms A – C

Accounts Receivable
Money a company is owed by its customers, because the company provided products or services.
Accounts Payable
Money a company owes its vendors or creditors to pay for products or services the company received.
Arrears
A situation when a payment is owed, or has not been paid.
Asset
The money, equipment, and payments due, which allow a company to conduct business. The opposite of a Liability.
Asset-Based Lending
A business loan, or line of credit, that uses a company’s accounts receivable or inventory as collateral.
Cash Flow
The total amount of money that passes in and out of a company as it conducts business.
Collateral
The property or assets that secure a loan.
Credit Facility
The maximum size of assets that your company can borrow against.
Creditworthy
Being worthy of credit because of property, money, or a history of repaying credit on time.
Creditor
A company that is owed money.

TERMS D-I

Debt Collection
The collection of outstanding debts collected by one company for another.
Default
Failing to pay back a loan.
Flat Fee
A set price charged for products or services. The price doesn’t change, no matter how much the customer takes or uses.
Interest
The price a borrower pays to maintain a loan.
Inventory
Supplies and products that a company holds before they are sold to customers. Considered an asset for the company.
Inventory Financing
Using a company’s inventory as collateral for a business loan, or line of credit.
Invoice
A document that outlines the transaction between a company and client. It shows the amount that the customer owes.
Invoice Factoring
Using a company’s invoices as collateral for a business loan, or line of credit.

TERMS L-V

Lien
The right to keep or sell the collateral for a debt or loan, when the debtor defaults.
Liability
Money or debt owed by a company. The opposite of an Asset.
NOLV
Net Orderly Liquidation Value
Outstanding
An invoice or debt that has not been paid.
Overdue
Debts, invoices, or accounts payable that are not paid on time.
Security Interest 
A claim or lien that grants a lender security interest in the collateral for a debt or loan.
Underwriting
To understand the risk for a debt, based on the history of the borrower.
Vendor
A company offering goods and services for sale to a company.

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