Common Lending and Loan Terminology

Making the decision to apply for a Fast and Easy Funds business loan, whether out of necessity or the desire to grow your business, can be a stressful time in your business career. No one likes having to owe anyone money, but taking out a business loan can easily become the best business decision you have ever made. Whether the loan is intended to help alleviate a lapse in payments or help you grow your company by being able to purchase a larger inventory, Fast and Easy loans are a great option for your business. When it comes time to decide on a short-term business loan, you may feel uneasy with unfamiliar loan terminology.

Fast and Easy Funds wants to eliminate the smoke and mirror by defining common terms that are used in loans and lending:

  • Accounts Receivable- Is the money that a company has a right to receive because it provides customers with goods and/or services and has yet to be paid.
  • Annual Percentage Rate (APR)- A precise description of the cost of money that reflects the actual interest rate and the cost of certain expenses charged as part of the process of obtaining the loan.
  • Asset Based Lending- A business loan secured by collateral (assets). The loan or line of credit is secured by inventory, accounts receivable, and other balance sheet assets.
  • Cash Flow- The net operating income minus the total of all debt service payments.
  • Cash Advance- Short term loans that offer borrowers access to fast cash.
  • Credit Line- A loan that allows revolving use of the credit, that is, after funds have been borrowed and repaid, they may be borrowed again without applying for a new loan.
  • Collateral- Something pledged as security for repayment of a loan, to be forfeited in the event of a default.
  • Due Diligence- The act of carefully reviewing, checking, and verifying all of the facts and issues before proceeding. In lending it is verification of employment, income and savings, credit report, review of the appraisal, and status of the title.
  • Fee Agreement- An agreement between the borrower and the broker, which specifies the relationship between them and the amount of compensation tot the lender.
  • Gross income- Income before tax deductions, social security, saving plans, etc.
  • Hazard Insurance- Insurance to provide compensation if the improvements are damaged or destroyed. It is almost always a requirement of loans.
  • Interest Rate- The percentage of the loan amount charged for borrowing money.
  • Inventory Financing- A form of asset based lending that allows businesses to use inventory as collateral to obtain a revolving line of credit, which can be used to purchase additional inventory or help a business get through seasonal fluctuations in cash flow.
  • Lien- A claim on a property of another as a security for money owed.
  • Originator- An individual who works with a borrower to start a loan. Usually an employee of a financial institution, an employee of a broker, or an independent contractor affiliated with several brokers. The originator determines the type of loan a borrower qualifies for, helps complete an accurate application, gathers necessary documents, and acts as an intermediary between the borrower and underwriter.
  • Term Loan- A monetary loan that is repaid in regular payments over a set period of time. A term loan usually involves an unfixed interest rate that will add additional balance to be repaid.