Business Funding Glossary

Accounts receivable (AR)

Accounts receivable is money owed to a business for work already delivered but not yet paid for.

ACH debit

An ACH debit is an automated withdrawal a business authorizes a funder to pull directly from its bank account, typically on a fixed daily or weekly schedule, as the standard remittance method for revenue-based funding.

Amortization

Amortization is the repayment of a balance through scheduled installments that cover both interest and principal over a defined term.

APR (annual percentage rate)

APR expresses the cost of capital as an annualized percentage, allowing facilities of different lengths to be compared on a common basis.

Average monthly revenue

Average monthly revenue is total business deposits over a period divided by the number of months, and it is the single strongest predictor of both approval and amount.

Bid bond

A bid bond is a surety instrument submitted with a contractor's bid, guaranteeing that if the bid wins, the contractor will sign the contract and provide the required performance and payment bonds.

Broker

A broker collects a business's application and submits it to multiple third-party funders, earning a commission when one of them funds.

Business bank statements

Business bank statements are the core document in a working capital decision, typically three to six recent months, showing deposits, balances, and existing obligations.

Business line of credit

A business line of credit is a revolving limit you can draw against and repay repeatedly, paying only for what is currently drawn.

Cash flow

Cash flow is the movement of money into and out of a business — and in funding, it is the primary basis on which capacity to repay is judged.

Collateral

Collateral is an asset pledged to secure a facility, giving the lender recourse to a specific item if the obligation is not met.

Consolidation

Consolidation replaces several existing obligations with a single facility, usually on a longer horizon, to reduce the combined periodic payment.

Days sales outstanding (DSO)

DSO measures the average number of days a business waits to be paid after making a sale.

Debt service coverage ratio (DSCR)

DSCR compares the cash a business generates against the payments it must make, expressing whether income comfortably covers obligations.

Default

Default is a failure to meet the terms of a financing agreement, most commonly by missing scheduled payments.

Direct lender

A direct lender underwrites and funds with its own capital, rather than submitting applications to third-party funders for a commission.

Draw

A draw is a withdrawal against an available credit limit, or in construction, a scheduled progress payment released as a job reaches defined stages.

Equipment financing

Equipment financing is capital tied to a specific asset, where the equipment itself serves as the security for the facility.

Factor rate

A factor rate is a fixed multiplier applied to the funded amount that determines total repayment — a 1.10 factor on $100,000 means repaying $110,000.

FICO score

A FICO score is the credit scoring model most commonly used by lenders, ranging from 300 to 850 and weighted toward payment history and amounts owed.

Holdback

A holdback is the agreed percentage of daily or weekly card sales remitted toward a merchant cash advance.

Interest rate

An interest rate is a percentage charged on an outstanding balance over time, so the cost accrues as the balance remains and reduces as it is repaid.

Invoice factoring

Invoice factoring is the sale of unpaid invoices to a third party at a discount, which then collects payment directly from your customer.

ISO (Independent Sales Organization)

An ISO (Independent Sales Organization) is an independent company that markets merchant cash advance and other business funding, packages applications, and submits them to third-party funders for a commission — the broker layer between merchants and funders.

Merchant cash advance (MCA)

A merchant cash advance is the purchase of a portion of a business's future receivables at a discount, repaid as a share of ongoing sales.

Mobilization

Mobilization is the cost of getting a construction job started before the first pay application — moving crews and equipment to the site, permits, insurance, and materials deposits — all spent weeks before the project pays anything back.

Net funded amount

The net funded amount is what actually reaches your bank account after any origination or administrative amounts are withheld from the approval.

Origination fee

An origination fee is an amount charged for arranging a facility, commonly deducted from the funded amount rather than billed separately.

Pay-when-paid clause

A pay-when-paid clause is a subcontract provision that ties the general contractor's obligation to pay a subcontractor to the GC's own receipt of payment from the project owner.

Personal credit score

A personal credit score summarizes an individual's credit history; in business funding it shapes pricing and structure more than it determines approval.

Personal guarantee

A personal guarantee is a commitment by a business owner to be personally responsible for a business obligation if the business does not meet it.

Positions (open positions)

A position is an existing loan or advance with a recurring payment; the number you carry determines how much of your cash flow is still available to service new capital.

Prepayment / early payoff

Prepayment is settling a facility ahead of schedule, which reduces total cost on interest-bearing products but not automatically on fixed-cost ones.

Progress billing

Progress billing is invoicing a long project in stages, with each invoice — often called a pay application — covering only the work completed since the last one.

Retainage

Retainage is a percentage of a construction contract — commonly five to ten percent — withheld until final completion and acceptance.

Revenue-based financing

Revenue-based financing provides capital repaid through regular payments tied to a business's revenue cycle, priced as a fixed total cost rather than accruing interest.

Revolving credit

Revolving credit is a facility whose availability is restored as you repay, allowing repeated borrowing up to a limit without reapplying.

SBA loan

An SBA loan is a bank loan partially guaranteed by the U.S. Small Business Administration, offering long terms and low rates in exchange for a lengthy application process.

Secured vs unsecured financing

Secured financing is backed by a specific pledged asset; unsecured financing is extended against cash flow and creditworthiness without a particular asset attached.

Soft pull vs hard pull

A soft credit inquiry is not visible to other lenders; a hard inquiry is, and can slightly affect your score. Never assume a review is soft unless the lender has said so in writing.

Stacking

Stacking is taking on an additional advance while others remain outstanding, typically to cover their payments — a pattern that compounds rather than resolves a cash-flow gap.

Term loan

A term loan is a lump sum repaid on a fixed schedule over a defined period, usually one to five years, with interest accruing on the outstanding balance.

Time in business (TIB)

Time in business is how long a company has been operating with revenue, generally measured from formation or first revenue; lender minimums commonly run from six months to two years, and Express Capital's published minimum is one year.

Total payback

Total payback is the sum of every dollar you repay across the full term, and it is the only figure that compares funding offers fairly across different pricing units.

Trigger leads

Trigger leads are lists sold by credit bureaus identifying people whose credit was recently pulled, letting other lenders call a business owner within days — sometimes hours — of a financing application.

UCC filing

A UCC filing is a public notice recorded under the Uniform Commercial Code that a lender has an interest in specified business assets.

Underwriting

Underwriting is the process of assessing whether and on what terms to extend capital, based primarily on a business's cash flow, history, and existing obligations.

Working capital

Working capital is the money a business uses to cover day-to-day operations — and, as a funding product, short-term capital repaid out of ongoing revenue.