Business Funding Glossary: Every Term, Defined

You need to enable JavaScript to run this app.Business Funding Glossary: Every Term, DefinedEvery term below is defined somewhere else on this site first — inside the article that uses it, where it has the context that makes it mean something. This page is the index: one place to look a word up, and a link to where it is actually being used.The definitions are not rewritten here. A term defined on more than one page uses one wording across all of them, which an audit enforces, so what you read below is word for word what the article says. Where a term appears in several articles, all of them are listed.244 terms, 417 definitions, drawn from the resource library and the calculators.Jump to a letter

Numbers and symbols

$1 buyout lease — A lease whose end-of-term purchase option is nominal, which makes it a financed purchase in substance. A fair-market-value buyout is a different deal, and the difference decides who owns the asset at the end.

13-week cash flow forecast — A week-by-week projection of the cash that will enter and leave the operating account over the next thirteen weeks — one quarter — built from the dates money actually moves rather than the dates revenue is earned or expense incurred, and re-forecast every week against what actually happened.

Accessorial — Revenue earned under contract beyond the linehaul — detention, layover, truck-ordered-not-used, reconsignment, driver assist — and abandoned in practice for documentary rather than commercial reasons.

Accounts receivable aging — A report listing every unpaid customer invoice by age bucket — current, 1–30, 31–60, 61–90 and over 90 days — as of a stated date. Read for three things: the as-of date, the concentration of the balance in one or two customers, and what has come to rest in the over-90 column.

Accrual pricing — A price that runs with time on the balance still owed, so the cost falls as the balance falls and stops when the balance reaches zero. The basis a line of credit and a bank term loan are both quoted on, and the opposite of a factor rate, which fixes the total at signing.

ACH descriptor — The originator text a bank prints beside an automated debit or credit. The field that identifies a funder's remittance, a card processor's settlement or a transfer between a business's own accounts, whether or not any of them was disclosed.

Advance rate — The share of an invoice’s face value, or of eligible collateral, that a factor or lender pays out at purchase or draw — commonly 80% to 90% on receivables. The remainder is held as a reserve until the account settles and is returned less the fee.

Affordability cap — The largest advance an account can carry, solved backwards from the payment rather than forwards from revenue: the daily remittance left after existing positions, at a share of deposits and a cushion of balance the account can carry, multiplied by the banking days in the term and divided by the factor rate.

Annual percentage rate (APR) — The cost of credit as a yearly rate relating the amount received to the amount and timing of the payments. Under the actuarial method the periodic rate is the one that discounts the payment stream to the amount financed, multiplied by the number of periods in a year.

Application rate — The share of employer firms that applied for a loan, line of credit or merchant cash advance in the twelve months before the survey — 38% in the 2025 survey. The denominator for every outcome share, which is why an outcome share cannot be read as a share of all firms.

Approval lag — The days between the date changed work is directed or begun and the date a signed change order makes it billable. The firm's own measure; the standing exposure it produces is annual revenue × change-order share × approval lag ÷ 365.

Asset-based lending — A revolving facility sized and monitored against collateral rather than financial ratios — receivables at one advance rate and equipment or inventory at a lower one — with the lender controlling collections through a lockbox and reporting running weekly or daily. Fewer financial covenants than a bank line, more surveillance, and a practical size floor set by its fixed monitoring cost.

Assignment of claims — The statutory exception under which amounts due under a federal contract may be assigned to a bank, trust company or other financing institution, with notice to the contracting officer, the disbursing office and any surety.

Asynchrony — The structural mismatch between the settlement schedule of a carrier's costs — fuel at the pump, labour weekly, fixed obligations monthly in advance — and that of its revenue, which settles on the counterparty's terms in arrears. Present at every level of profitability.

Attachment — The point at which a security interest becomes enforceable between the debtor and that creditor — typically on a signed security agreement, value given and rights in the collateral.

Average daily balance — The mean end-of-day balance of the operating account across the statement window. The cushion a remittance is actually paid out of, and the figure that most often sets the size of an offer.

Average loan size — Total dollars approved divided by the number of loans approved in the same period — $37 billion ÷ 77,600 = $476,804 for 7(a) loans in fiscal year 2025. A mean, pulled upward by the largest loans; the SBA publishes no median, so the typical loan is smaller than the average.

Banking day — A weekday on which the banking system settles, so that an ACH debit can present and a deposit can post. Weekends and bank holidays are not banking days, which is why a daily remittance runs on about 21 days a month and 252 a year rather than on 30 and 365.

Base rate — The reference rate to which a 7(a) loan's regulatory spread is added — for most lenders the prime rate, which individual banks set and the Federal Reserve reports on its H.15 release as the rate posted by the majority of the largest twenty-five banks.

Blanket lien — A financing statement whose collateral description reaches all of the debtor's assets, now owned or later acquired — receivables, inventory, equipment, deposit accounts, contract rights — as against a specific filing that names particular collateral.

Borrowing base — The collateral value a lender will advance against on a given day — eligible receivables and inventory at their advance rates, less ineligibles, concentrations and reserves — recalculated with each certificate the borrower submits. What limits an asset-based line in practice, whatever the facility’s headline size.

Break-even discount — The supplier discount at which a purchase made with borrowed money exactly repays that money's cost: the discount divided by the share of list still paid must equal the cost of capital, so a 30% cost of capital is covered by a discount of about 23%, not 30%.

Broker bond — The $75,000 surety bond or trust fund a property broker must keep in force under federal rules, claimed against by every carrier a failing broker owes. Partial recovery, not security.

Cadence change — Moving a remittance from daily to weekly, or shifting the debit day to land after deposits rather than before them. Often the cheapest fix available, because it costs the funder nothing.

Capital stack — The ordered set of financing sources available to a contractor, from the cheapest and most restrictive at the top to the most expensive and most flexible at the bottom, each sized by a different thing — a borrowing base, an asset, a signed contract, a multiple of cash flow, or a month of revenue — and each moving surety-adjusted working capital in a different direction when it funds.

Cash conversion cycle (CCC) — Days inventory outstanding plus days sales outstanding minus days payables outstanding: the distance in days from cash out to cash in, net of the credit suppliers extend.

Cash-flow shape — The pattern of a business’s receipts on three axes — rhythm (even or lumpy), purpose of the shortfall (a timing gap or a growth step) and season (flat or peaked) — read from the bank statements, plus whether an asset, invoice or contract stands behind the need. The variable that picks the product; credit score picks the price inside it.

Change order — A written modification to the contract, signed by a party with authority to bind the owner, that adds, deletes or alters the scope and states the adjustment to price and time. Until it is signed, the changed work is a cost with no matching receivable.

Claim — A request for adjudication submitted after a service has been rendered, evaluated against rules the provider does not set. It becomes a determinate obligation only after adjudication concludes — which is what distinguishes it from a commercial invoice.

Clean file — Four months of complete statements as the bank issued them, matching entity details, disclosed positions with payoff figures, verified wire details and a reachable decision-maker. Missing any one converts a same-day file into a next-day file.

Clean-up period — A clause requiring a revolving balance to reach zero and stay there for a stated number of consecutive days in each year. It is the test that separates a facility being used as a line from one being used as a term loan; ask whether your agreement contains one before you sign.

Client concentration — The share of billings sitting with the largest client. Above a certain level the agency is underwritten on that client's credit rather than its own, and a late payment becomes a missed payroll rather than a nuisance.

Collection lag — Pay date to deposit date, measured per client — not the payment terms on the contract. Timesheet approval, invoice consolidation, client accounts payable and any VMS settlement all sit inside it.

Committed availability — The undrawn part of a committed facility's limit, which the lender has agreed to lend but has not yet lent. It is what a committed line sells and a term loan does not, and it is why a line is underwritten against how the business will look on its worst week rather than against the statements on the desk today.

Complete statement — Every page of the bank’s own issued statement, for every month in the window, in the form the bank produced it — including the pages that carry only notices or a balance summary. A statement is complete when the pages supplied match the "Page 1 of N" line printed on it and no month in the window is absent.

Concentration limit — The maximum share of a receivables book that one account debtor may represent before the excess is excluded from eligibility — commonly 20% to 30%. The rule that makes a business with one large customer smaller, on paper, than its ledger.

Condition precedent — A contractual event that must occur before an obligation exists at all. Courts generally require unambiguous language — "condition precedent", "only if", "assumes the risk of the owner's nonpayment" — before reading a payment clause as one.

Confession of judgment — A pre-signed consent to a judgment against the business or its guarantor, allowing a creditor to enter one without a lawsuit and sometimes without notice — which removes the defences a lawsuit allows. Absent from the firm's agreements; New York restricted their use against out-of-state businesses in 2019.

Consolidation — One new agreement that pays off every existing position directly, against payoff letters, leaving a single obligation and a single remittance. A new advance that lands beside the old positions is stacking, whatever it is called.

Constructive change — Work beyond the contract's scope performed at the direction of the owner's representative without a formal change order — a written or oral order, interpretation or determination that in fact changes the work. On federal construction it is treated as a change order only if the contractor gives written notice that it regards the order as one.

Consumer report — The file a credit bureau returns on a person: identifying details, tradelines with balances and payment history, collections, public records and a list of prior inquiries. The score is a number computed on top of it, not the thing itself.

Continuing guarantee — A guarantee drafted to cover obligations arising after it is signed, so a renewal or a further advance is guaranteed by the paragraph already given rather than by a new one. Where revocation is permitted at all it is prospective: it does not reach what is already outstanding.

Contractual adjustment — The difference between the billed charge and the allowed amount under a payer agreement. Extinguished, not deferred: it was never revenue, and a system that reports it as such is reporting an accounting artefact.

Convenience sample — A sample made up of whoever can be reached and chooses to respond — through partner organizations, in the survey's case — rather than one drawn at random from a list of the whole population. Its percentages describe the respondents; how far they describe every employer firm depends on who answered, which a random draw would have settled by design.

Conversion — Manufacturing that transforms raw materials into a product, as against buying finished goods for resale. Materials lose independent identity in process and the transformation depends on the borrower's own performance, which is why converting businesses are harder files for this product.

Cost of capital — The total cost of a funding transaction expressed as a percentage of the amount funded: a 1.20 factor on a four-month term is a 20% cost of capital. A price attached to the money advanced rather than a rate running per year, so it cannot be set against an APR without converting it first.

Cost of waiting — The contribution margin, revenue, discount or penalty a business forgoes for each day capital it needs has not arrived, multiplied by the days it waits. Invisible on every term sheet, and the reason a lower rate is not always the cheaper capital.

Covenant headroom — The distance between a covenant's tested value and its required level, translated into the operating change that would consume it — the dollars of additional current liabilities, or the percentage decline in EBITDA, at which the test fails.

Covered consumer financial product or service — Under the CFPB’s Personal Financial Data Rights rule, a Regulation E account, a Regulation Z credit card, or the facilitation of payments from either — where a Regulation E account is a consumer asset account established primarily for personal, family, or household purposes. A business operating account is outside the definition.

Credentialing lag — The months between a newly engaged provider starting work and being enrolled with each payer, during which the provider is compensated and cannot bill that payer. A capital event routinely modelled as an operating one.

Current portion of long-term debt — The principal on any facility scheduled for repayment within twelve months, classified as a current liability. It reduces working capital dollar for dollar, and capacity at the multiple.

Current ratio — Current assets divided by current liabilities: what the business could turn into cash inside twelve months against what it owes inside twelve months. The most common balance-sheet covenant, and the easiest to move without changing the business, because a ratio above 1.0 rises when both sides shrink by the same amount.

D-U-N-S number — Dun & Bradstreet's nine-digit business identifier, issued free on request, on which a D&B credit file is built. Anyone charging for one is charging for a form.

Daily balance summary — The date-and-balance table most business bank statements print, usually near the end, listing the account's closing balance on each day it changed; a day not listed carries the last balance printed. The one place average daily balance and negative days can both be read without touching the transaction register.

Days beyond terms — The number of days past the agreed terms that a payment arrives, as the supplier reports it. The raw input a payment score is computed from, and the reason zero days beyond terms means paying on terms rather than paying early.

Days inventory outstanding (DIO) — The average number of days cost sits in inventory or unbilled work before it is sold or invoiced: inventory divided by cost of sales per day. For a service business the inventory is work performed and not yet billed.

Days of cover — Average daily balance divided by the combined daily remittance a file proposes: the number of banking days the account could carry the debits with nothing coming in. Judged against the whole file rather than a fixed floor: a thin cushion sizes the offer down, and an account with almost none is declined.

Days of outflow — A balance divided by average daily operating outflow: the number of banking days the account could fund the business with nothing coming in. The operator's counterpart to days of cover, which is measured against a remittance rather than against spending, and read at each month's lowest end-of-day balance rather than at the average.

Days payables outstanding (DPO) — The average number of days the business takes to pay its own suppliers — the one term of the cycle that works in its favour, and negotiable more often than assumed.

Days sales outstanding (DSO) — The average number of days between invoicing and collection. Usually the dominant term of the cycle for a service business, and the most fixable; measure it per customer, because the average hides the account doing the damage.

Debit day — The day of the week a weekly remittance lands. Nearly free to choose and enormously consequential: the day after the most reliable deposit, not the day before it.

Debt schedule — A list of every borrowing obligation the business carries — lender, original amount, current balance, payment, rate where there is one, and maturity — as of a stated date. Asked for on the largest requests, because a payment schedule running years beyond the statement window cannot be sized from four months of deposits alone.

Debt service — The scheduled payments on everything a business has already borrowed, measured against its revenue. Beyond a certain share of deposits a business cannot support another payment, and that share arrives sooner than most owners expect.

Debt service coverage ratio (DSCR) — Cash available to service debt divided by scheduled debt payments. The SBA's 7(a) procedures set the floor at 1.0× for Small Loans of $350,000 or less and 1.15× above that, which makes cash flow rather than a score the target.

Declining balance — The principal still outstanding on a loan at a given moment. Interest on an amortising loan is charged on that shrinking figure rather than on the original amount, so the interest share of each payment falls as the loan runs and early repayment genuinely saves money.

Delivered amount — The part of the purchased amount a funder has already collected, in dollars or as a share of the total. It decides how much of a renewal is new money, because absent a prepayment discount whatever has not been delivered is what gets rolled into the next agreement.

Delivered to date — The total remitted against the purchased amount so far. Set beside the purchase price rather than the purchased amount, it says how much of the funder's own cash is still out, which is what governs how a request for relief is answered.

Deposit consistency — How evenly revenue arrives month to month, as distinct from its size. A payment is sized against the weakest normal month, so a business depositing $40,000 every month is a stronger file than one averaging $60,000 between $12,000 and $150,000.

Deposit-day count — The number of distinct days in a statement month on which money actually lands in the operating account, as distinct from how much lands. The figure that decides remittance cadence: deposits on most banking days fit a daily debit, deposits on four or five days fit a weekly one.

Derogatory item — An adverse entry on a credit file — a collection, a judgment, a lien, a bankruptcy, a delinquency. In a funding file what is read is its date and whether it is closed, because an unresolved item describes the present and a settled one describes the past.

Discharged bankruptcy — A bankruptcy the court has concluded, releasing the debtor from the discharged debts. Not disqualifying here; an open case is, because a court process has authority over the assets.

Disclosure threshold — The transaction size at which a commercial financing disclosure statute stops applying, measured per transaction: $250,000 in Connecticut, $500,000 in California, Virginia, Florida and Kansas, $1,000,000 in Utah and Texas, and $2,500,000 in New York.

Diversion — Moving receipts away from the account the remittance draws on. The conduct a performance guarantee is written for, and the trigger for the harshest provisions in any funding agreement.

Documentary credit — A bank's undertaking to pay a supplier against presentation of specified shipping documents — one of the two usual ways a purchase order funder settles the supplier's cost, the other being direct payment.

Double-dipping — The structural consequence of rolling a fixed-payback obligation into another: the balance rolled in already carries the original factor, and the new factor is applied to all of it, so part of the cost is charged twice.

Draw — An amount taken against a line's limit, which reduces availability until it is repaid. The unit a line is priced on.

Early-payment discount — A percentage taken off an invoice in exchange for paying it before the due date, written as discount/days net terms — 2/10 net 30 is 2% off for paying by day 10 on a 30-day invoice. Its annualized cost is (discount ÷ (100 − discount)) × (365 ÷ days accelerated).

Effective renewal factor — A renewal's added obligation divided by the cash that actually arrives: new total payback less the payback remaining on the position it retires, over the face amount less the payoff figure. Absent a prepayment discount it is higher than the quoted factor whenever any balance is rolled in, and the gap is the quoted factor's cost — the factor minus one — charged on money that is not new.

Employer burden — Everything an employer pays on top of gross wages on the same weekly cycle: the employer share of social security and Medicare tax, federal and state unemployment tax, workers' compensation premium and benefits. This article uses 12% as a middle estimate.

Employer firm — A business with one to 499 employees in addition to its owner, as the Small Business Credit Survey defines the sample its employer-firm report covers. Firms with no employees other than the owner are surveyed and reported separately, and no figure from the employer report describes them.

Equitable adjustment — The adjustment to contract price and time, in either direction, that follows a directed or constructive change, negotiated after the fact and executed as a bilateral modification once agreed. On federal work the contracting officer is directed to negotiate it in the shortest practicable time.

Equity cure — A right, granted a limited number of times over the life of a loan, to have a contribution of new equity or subordinated debt counted as if it had been EBITDA or working capital on the test date, restoring compliance with a breached covenant. Distinct from a waiver, which is the lender's priced consent to overlook the breach.

Equity versus debt — Debt has fixed timing and equity does not. A business whose return is uncertain in timing cannot safely carry an obligation that is certain in timing, however good the idea.

Estimated APR — The annualised figure New York and California now require providers of sales-based financing to disclose alongside the total dollar cost, computed on an estimated term because the true term depends on future sales.

Estimated cost to complete — The current best estimate of what a job will cost when finished — the one number on the schedule that is purely a judgement, and the one that drives everything else.

Events of default — The conduct a funding agreement treats as a breach — diverting receipts, changing the bank or processor without notice, blocking or reversing the debit, misrepresenting the receivables. In a well-drafted agreement a slow month is not on the list.

Existing positions — Other advances or facilities already drawing on the same deposits, visible in the statements as recurring debits whether or not disclosed. The most common cause of a decline.

Expected term — The duration an advance is projected to take to deliver the purchased amount, derived from the business's own revenue rather than fixed as a maturity date. An output of underwriting's forecast, which is why a revenue miss moves the term and not the total.

Factor rate — The multiplier that fixes an advance's total cost at signing: advance × factor = payback, so a 1.30 factor on $100,000 is $130,000 back. A price, not an interest rate — it does not accrue, does not compound and does not shrink on early repayment unless the agreement grants an early-payoff saving.

Factoring reserve — The unadvanced balance of a purchased invoice — face less the advance — held by the factor until the account debtor pays, from which the discount fee and any chargeback are deducted before the rebate is returned.

Fade — The decline in a job's gross margin from bid to completion. One fading job is ordinary; a pattern across jobs is read as a finding about estimating or execution — a character-and-capacity issue that no balance-sheet repair lifts.

Fair market value lease — A lease whose end-of-term purchase price is the asset's market value on that date rather than a figure agreed at signing. The payment is lower than on a $1 buyout because the lessor keeps a residual interest in the asset, and the cost of owning it at the end is a number nobody has quoted yet.

FICO SBSS — The Small Business Scoring Service score, on a 0–300 scale, blending business and personal credit data. Formerly the SBA's pre-screen for 7(a) Small Loans; sunset in 2026 in favour of debt service coverage.

Financial covenant — A promise in a loan agreement to keep a stated financial ratio or amount inside a stated limit, tested from the borrower's own financial statements at set dates for as long as the loan is outstanding. Breaching one is a default under the agreement whether or not a payment has been missed.

Financing outcome — The survey's classification of an applicant by how much of the financing it sought it received: the full amount, some or most of it, or none. Measured against the amount requested, not against the amount the business needed, and recorded as the applicant's own account.

Firmographics — The descriptive facts on a business credit file — legal name, address, phone, entity type, industry code, years in operation, size. Not a credit judgment, but the basis on which inbound trade data is matched to the right file.

First-pass resolution rate — The proportion of claims adjudicated and paid on initial submission without rework. The single most informative summary of how much of a practice's collection delay is self-inflicted.

Five-debit month — A calendar month containing five occurrences of the weekday a weekly remittance lands on. A year holds 52 weekly debits against twelve months of four, so four months each year carry a fifth — the months in which a business budgeting the four-debit figure comes up short.

Fixed-charge coverage ratio (FCCR) — Cash left after the charges a lender knows the business cannot skip — cash taxes, unfinanced capital expenditure and owner distributions — divided by scheduled principal and interest. The coverage test that catches what DSCR does not: a business whose owner takes the cash out before the bank is paid.

Free cash flow — Operating cash flow less capital expenditure: what a year’s operations left after the equipment needed to keep operating was paid for. Not a line on any audited statement — every user computes it, so ask which capital expenditure was subtracted and whether debt service and owner distributions were taken out first.

Front-loading — Allocating more of the contract price to the early lines of the schedule of values than their share of the cost, so that early applications bill ahead of the work. It reverses in full by the last application, shows on the WIP schedule as billings in excess of cost until it does, and on federal work is what the unbalanced-pricing analysis exists to find.

Fuel position — Fuel consumed and paid for before delivery, compensated only after invoicing and collection: credit the carrier has extended to its own operation, sized to consumption times the collection period, and carried permanently per tractor.

Funding date — The date the advance is released to the business. Neither the application date nor the approval date, and the date the agreement's payment schedule is written from, which is why it is worth confirming before signing rather than after.

Funding release — The funder instructing its bank to send the money — the event the 2pm ET cutoff exists to protect. Distinct from approval, which moves nothing, and from availability, which is the receiving bank posting the wire on its own schedule.

Guarantee of collection — A guarantee under which the creditor must pursue the business first — sue it, take judgment, attempt collection — and may come to the guarantor only for the shortfall, as against an absolute and unconditional guarantee, which allows the creditor to sue the guarantor alone and first.

Guarantee of performance — In an advance, a guarantee of the owner's conduct — not diverting receipts, not switching processors, not closing the account to escape remittance — as distinct from a guarantee of payment, which converts a contingent purchase into a personal debt.

Guaranty of performance — An owner’s personal promise that the business will perform the agreement — not divert receipts, change banks or processors to defeat the debit, block the ACH, misrepresent revenue, or close or sell the business to escape it — as distinct from a guaranty of payment, under which the owner owes the purchased amount whatever happens to the business.

Guaranty percentage — The share of a 7(a) loan's principal the SBA promises to cover if the borrower defaults — up to 85% on loans of $150,000 or less, 75% above that, 50% on SBA Express and 90% on the export programs. The lender carries the rest; the borrower owes the whole loan either way.

Hard inquiry — A credit inquiry recorded when a lender pulls a file to decide a formal application for credit. Visible to other lenders for two years and weighed by scoring models for one; a cluster of them in a short period costs more than any single one.

Holdback — A stated percentage of each day's card receipts taken at the processor — the original advance structure and the most genuinely revenue-linked, because a slow day is automatically a small remittance.

Holding-period effect — Because the fee is fixed, compressing the same dollar cost into a shorter term raises the annualised rate. The reason early payoff of a fixed-fee advance with no early-payoff saving costs more per year, not less.

Homestead exemption — State-law protection of some or all of the equity in a primary residence from judgment creditors. It ranges from nearly total in a few states to nearly nothing in others.

Indemnity — The contractor's — and usually the owner's and spouse's — personal undertaking to reimburse the surety for losses and expenses. The reason a surety underwrites to an expectation of zero losses rather than pricing them.

Invoice factoring — The sale of specific unpaid invoices to a factor at a discount, with most of the face value advanced at purchase and the reserve, less the fee, paid when the customer settles. A sale of accounts within Article 9 of the Uniform Commercial Code rather than a loan, so the customer’s credit carries more weight than the seller’s.

Joint and several — Where more than one person guarantees, each is liable for the whole amount, not a proportionate share; the creditor pursues whichever guarantor is most collectible, who is left to seek contribution from the others.

Last furnishing — The day a claimant last performed labour or supplied material on a project. On federal work every Miller Act deadline — the 90-day notice, the 90 days of non-payment that open the right to sue, and the one-year bar — is counted from it, and it must be provable from the claimant's own records.

Line of credit — A reusable limit drawn against as needs arise and repaid to be drawn again, priced on the drawn balance. The only structure that rewards repaying quickly, because the limit refreshes.

Little Miller Act — A state statute modelled on the federal Miller Act that requires a payment bond on that state's public work, where a mechanics lien cannot attach, and sets its own contract threshold, notice requirement and suit deadline for claims against the bond.

Loss payee — The party named on an equipment insurance policy to be paid before the owner if the asset is damaged or destroyed, up to the balance owed. An equipment lender requires the endorsement before funding, and it is a routine document that routinely holds an approved file for a day.

Low point — The lowest projected ending cash balance in the forecast window and the week it occurs. It carries four readings — how much, when, for how long, and which line caused it — and it is the first thing a funder reads.

Margin floor — The gross margin beneath which an order is not worth financing: at roughly four points of financing cost, an order carrying fifteen points retains eleven and one carrying eight retains four, before execution variance and overhead. Below roughly ten points the residual no longer compensates the delivery risk left with the borrower.

Mechanics lien — A statutory security interest in the improved property in favour of those who furnished labour or material to it. It arises from state law rather than from the subcontract, which is why many states protect it from advance waiver.

Merchant cash advance — The purchase of a fixed dollar amount of a business's future receivables at a discount, paid for with a lump sum today and collected as revenue arrives — by fixed ACH debit, by a percentage holdback at the card processor, or by a processor split.

Mezzanine debt — Subordinated debt sized as a multiple of cash flow rather than against collateral, ranking behind the senior lender and ahead of equity, priced with a cash coupon and often a deferred or equity component. Long-dated and usually interest-only, so it adds to working capital in full on the day it funds.

Minimum operating balance — The cash a business decides never to go below — enough for a payroll tax deposit, a repair or one late customer — held as a floor beneath the forecast. The funding requirement is this floor less the low point, needed by the week before the first negative one.

Mixed file — A credit file in which another person's accounts have been matched to yours, usually through a shared name or a transposed identifier. It is a reporting error rather than a credit problem, and it is one of the two things worth looking for when you pull your own report.

Mobilization — The cost of bringing a job to the point where production can start — bonds, insurance, site set-up, temporary facilities, submittals and the deposits on long-lead material — and, on highway and heavy-civil work, the lump-sum pay item that reimburses it, conventionally bid at about 10% of the contract and paid out in steps tied to the share of the contract earned.

Mobilization gap — The cash a contractor spends on a job between award and the first progress payment clearing — bonds, insurance, submittals, material deposits and the first weeks of payroll — which no rung of the stack sized on last year’s balance sheet has seen yet. On a $2,400,000 ten-month job under the federal payment clocks it is $350,880 before the first draw and $134,880 after it.

Modification agreement — The written variation that records a reduced remittance: the new amount, the debits or dates it covers, the amount and date the schedule returns to, that the variation is not a default, and that the purchased amount is unchanged.

Name control — The identifier the IRS builds from the legal name on the Form SS-4 application when an EIN is issued, and against which it matches the name and identification number as a pair. A business name that does not resolve to the entity behind the EIN is the most common identity defect in a funding file.

Negative days — Days on which the account balance is below zero. Read as a measure of cushion — how much of the balance a new payment would consume — rather than of character.

Net collectable value — What survives contractual adjustment, denial and rework leakage, and the patient-responsibility shortfall. The only figure with predictive content for capital requirement, borrowing base, advance rate and enterprise value.

Net funded amount — What actually lands in the account after every fee deducted at disbursement. The denominator every comparison should use — never the face amount of the advance.

Net new funding — What arrives in the account after the existing balance is retired and fees are taken: on a $75,000 renewal against a $25,000 outstanding balance, $50,000. The figure to set against the increase in total payback.

No-setoff commitment — A contract provision under which payments to an assignee are not reduced by the contractor's other liabilities to the government. Its presence or absence materially changes what an assignment is worth to a financier.

Non-use fee — A periodic charge on the undrawn portion of a limit, as distinct from interest on the drawn balance. It is what the funder is paid for holding capital available, and it is the item most often left out of a rate comparison.

Notification factoring — A purchase of receivables in which the account debtor is told in writing to pay the factor directly. Once notified, the debtor discharges the invoice only by paying the assignee, which is what makes the arrangement enforceable and what makes it visible to your customers.

Off-season bridge — Capital that carries staff, rent and insurance through the trough to protect the crew the next season needs. Smaller, longer, and sized against trough revenue rather than annual revenue.

Open default — An unresolved default on a prior obligation. A decline; a settled or paid-off default is not, because the distinction is resolution rather than history.

Operating cash flow — The operating-section total of the statement of cash flows: net income with non-cash charges added back and the year’s increase in receivables, inventory and the other operating balances taken out, increases in payables and accruals added in. A flow over a year, where working capital is a stock on a day; it stops above capital expenditure, debt principal and owner distributions.

Operating working capital — Receivables plus inventory minus payables — cash and short-term debt stripped out. The version that describes the operating cycle, because it measures what is tied up in doing the work rather than what is in the bank on the day.

Option year — A contract period the government may, but need not, exercise. Committed work is the base period; a five-year vehicle with four option years is one year of contracted revenue as most credit policies read it.

Over-billing — Billings in excess of costs and estimated earnings: more invoiced than earned. A balance-sheet liability, because it is work still owed, and cash that belongs to future costs.

Ownership cost — The cost of holding a machine whether or not it works: depreciation, the cost of the money tied up in it, and the insurance, property tax and storage that accrue by the calendar. Distinct from operating cost — fuel, wear parts, repairs and the operator — which accrues by the hour and is paid under owning and renting alike.

Pay-if-paid — A condition precedent: the general contractor's obligation to pay the subcontractor arises only if the owner pays. Where enforced, it shifts the risk of the owner's insolvency onto a party that never chose the owner.

Pay-when-paid — A timing provision: the general contractor pays the subcontractor after it receives payment from the owner. The obligation is not in doubt, only its schedule; most courts read it as setting a reasonable time for payment.

Payback amount — The purchased amount in dollars — the factor rate applied to the advance. The only figure that cannot be presented misleadingly, and the one to compare between offers.

PAYDEX — Dun & Bradstreet's 1–100 business payment score, built on days relative to terms: 80 means paying exactly on terms, and scores above 80 are earned by paying early.

Payer mix — The distribution of a practice's receivables across commercial, Medicare, Medicaid, workers' compensation and patient responsibility. Each class carries its own adjudication cycle, denial profile and realisation rate, which is why aggregate ageing conceals it.

Payment bond — A surety's undertaking to pay those who furnish labour and material on a bonded project if the contractor does not. Required on federal construction contracts above $100,000 under the Miller Act, with its own notice and suit deadlines.

Payment lag — The days between the end of a billing period and the deposit of the money for it — the approval cycle plus the payment clock — measured per contract rather than read from its terms. On federal construction the clock is 14 days from a proper payment request to the prime and 7 more to the subcontractor; private work commonly runs 45 to 60.

Payoff letter — A funder's written statement of the amount required to retire a position on a stated date. The mechanism of a genuine consolidation, and the document to request the morning you apply, because it runs on the other funder's timeline.

Payroll funding — Advances against billed, approved invoices, sized to payroll — the most common structure in staffing because it scales automatically with the requirement.

Peak cash requirement — The largest negative cumulative cash position a job reaches, measured the day before a draw is received. On a job whose first application is small it falls just before the second draw and equals the cost paid to that day less the first draw net of retainage — on the worked $4,000,000 contract, $506,364 plus $10,000 for every day of payment lag.

Percent complete — Under the cost-to-cost method, cost incurred to date divided by estimated total cost. A cost measure rather than a physical one, which is why early material purchases make a job look further along than it is.

Perfection — The step that makes an attached security interest effective against other creditors, usually by filing a UCC-1 financing statement with the Secretary of State where the debtor is organised. Priority among perfected interests runs from the earlier of filing or perfection.

Performance-based payments — Contract financing paid on the achievement of defined, verifiable events rather than on costs incurred. The regulation's preferred method where the contracting officer finds it practical and the contractor agrees.

Permanent capital requirement — Weekly payroll including burden multiplied by the collection lag in weeks: the capital a staffing company must hold simply to operate at its current size, independent of profitability.

Permissible purpose — A ground on which the Fair Credit Reporting Act allows a consumer report to be furnished at all — a credit transaction involving the consumer among them. A report may be pulled for those purposes and no other.

Personal guarantee — An owner's promise to pay a business obligation from personal assets if the business does not. It survives the company's closure, dissolution or bankruptcy, which is the scenario it was written for.

Plaid Item — In Plaid’s vocabulary, one login at one financial institution and the accounts under it, represented on the requester’s side by an access token. Removing the Item revokes the token’s access to the associated data; disconnecting at the Plaid Portal stops future sharing without recalling copies already taken.

Pre-qualification — An indication of what a business is likely to qualify for, based on what has been seen so far and a soft credit pull. Not an approval, which follows underwriting.

Pre-season ramp — Inventory, hiring, equipment and marketing paid for ahead of the season's revenue. The classic seasonal need and the best-behaved one, because repayment lands during the peak.

Preliminary notice — A notice many states require a subcontractor to serve within a set number of days of first furnishing labour or material, without which the lien right does not exist. Served at the start of the job, when there is no dispute.

Prepayment discount — A contractual reduction in the payback amount for early payoff. Absent one, retiring an advance early — or being renewed early — saves nothing, because the unearned portion of the original factor does not come back.

Progress payments — Contract financing that reimburses a percentage of costs incurred as performance proceeds, before delivery, on eligible contracts — customarily 85% for a small business and 80% otherwise. Not a loan; they carry no interest.

Prompt payment statute — A federal or state law setting a deadline for paying approved amounts on construction contracts and imposing interest on late payment; many reach retainage release. The federal act is 31 U.S.C. §3901 and following.

Proper invoice — An invoice meeting every formal requirement of the contract and the payment regulations. The Prompt Payment Act's clock starts only on receipt of one; an improper invoice is to be returned within seven days and starts nothing.

Purchase order financing — A facility that funds the supplier cost of fulfilling one confirmed, non-cancelable order, disburses principally to the supplier, and is retired by the receivable when the goods are delivered and invoiced.

Purchase-money security interest — A security interest taken by the party whose credit paid for the collateral — the equipment lender or the dealer — in that collateral alone. Under UCC §9-324 it outranks an earlier blanket lien on the same goods if the financing statement is filed before or within twenty days after the debtor takes delivery.

Purchased amount — The fixed dollar total of future receivables the funder has bought, stated in the agreement; purchased amount ÷ purchase price is the factor rate. On a genuine purchase it is the ceiling on what the funder can ever collect, and it does not accrue, compound or change with time.

Quick pay — Accelerated payment of an invoice against a percentage discount. Short-term secured lending in which the interest rate is expressed as a discount; annualised cost ≈ (discount ÷ (100 − discount)) × (365 ÷ days accelerated).

Quick ratio — Current assets less inventory, divided by current liabilities. The acid test; it strips out the least liquid current asset, and the gap between it and the current ratio is large and informative for an inventory-heavy business.

Rate difference (D) — The cost of the faster capital over its term less the cost of the slower loan over the same period, in dollars. The price of speed, fixed on signing, and the figure the cost of waiting is measured against.

Re-presentment — A second attempt at a debit that was returned, made the next banking day or folded into the next scheduled debit depending on the agreement. The attempt that decides whether a return is an incident or a pattern.

Read-only access — Permission to retrieve data about an account — transactions, balances, the identity on file, and account numbers where that product is enabled — with no authority to initiate a transfer. The scope of a bank link; the authority to debit comes from the ACH authorization in the funding agreement, not from the token.

Receipts and disbursements basis — Recording money on the day it becomes available in, or leaves, the bank account: a receipt when a deposit clears, a disbursement when a check or debit clears. Non-cash items such as depreciation and accruals disappear; balance-sheet items such as loan principal, deposits and tax payments appear.

Receivables gap — The interval between invoice, where purchase order financing ends, and the buyer's settlement on its terms. It lies outside the facility and must be separately arranged, usually through factoring layered beneath it.

Reconciliation — The contractual right to have a fixed remittance reduced when actual revenue falls short of the estimate it was sized against, usually on request and on production of statements. The clause that makes an advance a purchase of receivables rather than a loan payment with a different title.

Recourse — In factoring, the carrier's retained credit risk: an unpaid invoice may be charged back. Under non-recourse a defined portion of that risk transfers, typically limited to counterparty insolvency and excluding disputes, deductions and slow payment; the schedule, not the label, governs.

Reinstatement clause — A provision reviving a guarantee that had been satisfied if a payment on the guaranteed obligation is later returned, set aside or repaid, so that a paid-off balance and a released guarantor are not the same thing.

Release lag — The time between a job's completion and the return of its retainage, including closeout and, for a subcontractor, the period the general contractor waits for its own retainage from the owner. Expressed in years in the steady-state formula.

Relief window — The number of banking days a new advance's cash holds the account up before it is worse off than it was before the money arrived: net cash received divided by the daily shortfall already running plus the new daily remittance. It can never exceed the term divided by the factor.

Remittance — The fixed amount debited from the business account each banking day or each week to deliver the purchased amount. What a business actually lives with, and the figure to size against the weakest normal week.

Remittance share — Combined daily remittances — existing positions plus the one a new file proposes — divided by average daily deposits. Judged against the whole file rather than a fixed cut-off: a heavy share is sized down and priced, and a share the deposits cannot carry is declined.

Renewal — New funding taken while an existing position is partly repaid, with the outstanding balance rolled into the new agreement so that one obligation replaces the other. The normal path in revenue-based funding, and where terms actually improve.

Retainage — The portion of each approved progress payment — commonly 5% to 10% — that an owner or general contractor withholds until a defined release event, usually substantial completion or final acceptance. It is earned, approved and unpaid.

Retainage multiple — Retainage held on a job divided by that job's net profit. At 10% retention and a 3% net margin the multiple is 3.3 — the hold exceeds the profit more than three times over. The measure this article uses in place of the percentage of contract value.

Retention ratio — The share of net profit left in the business rather than drawn by the owner during the year. One factor in the numerator of the sustainable growth rate; an owner who draws half the profit has halved the capital available to grow.

Reverse consolidation — A structure that leaves existing positions running and instead deposits money on a schedule, usually weekly, sized to cover their debits, while the new funder collects its own lower remittance over a longer term. It retires nothing, so it cannot capture a prepayment discount, and if the deposits stop the business carries every original debit plus the new one.

Sale-leaseback — A transaction in which a business sells equipment it already owns to a funder and leases it back, converting an unencumbered asset into working capital while the asset stays in service. The lien moves onto the machine; the machine does not move.

Sales-based financing — A transaction repaid to the provider over time as a percentage of sales or revenue, in which the payment amount may increase or decrease with the volume of sales made or revenue received — including a fixed payment with a reconciliation that adjusts it to a percentage of sales. Virginia’s statutory definition, and New York’s.

Same-day funding — A file approved and wired on the day it is submitted. Achievable for a complete file submitted before the 2pm ET cutoff; the honest full range from application to money in the account is one to three business days.

SBA fiscal year — The agency's reporting year, October 1 to September 30. FY2025 ran from October 1, 2024 to September 30, 2025, and every count on this page is stated for that window unless it says otherwise.

Schedule of values — The itemized breakdown of a contract price by element of work that each progress billing is measured against: the application states the value of each line put in place, and the payment is that value less retainage. On federal fixed-price construction the request for a progress payment must itemize the amounts requested by element of work.

Season-aligned term — A term chosen so the remittance clears in the trough month rather than so the advance retires inside the season. Longer, priced further up the cost-of-capital range, and the only lever left once the amount is right.

Second position — A funder's term for an advance taken while another is outstanding, ranking behind it. The phrase makes the addition sound separate; the debit is not.

Second-tier claimant — A claimant with a direct contract with a subcontractor but none, express or implied, with the prime contractor that furnished the payment bond. Under the Miller Act it may sue on the bond only after serving written notice on the prime within 90 days of last furnishing, by a means that gives written third-party verification of delivery.

Section 179 deduction — The federal tax election that lets a business expense the cost of qualifying equipment in the year it is placed in service rather than depreciating it over years, subject to annual dollar limits the IRS publishes. Available on purchased equipment whether paid in cash or financed; a lease is a different question.

Security interest — A creditor's interest in a debtor's personal property securing an obligation, governed by Article 9 of the Uniform Commercial Code as each state has enacted it.

Shoulder month — A month between a season's peak and its trough, when revenue is at neither its maximum nor its floor. What makes a four-month window look like it has an average when the business does not.

Sizing range — The published rule that funding size runs from 80% to 150% of average monthly revenue, with position inside the range set by consistency, operating history, existing debt service and balance behaviour rather than by the amount requested.

Soft costs — The parts of an equipment invoice that are not the asset: sales tax, freight and rigging, installation, commissioning, training and extended warranty. They are financeable on most files and carry no resale value, so a lender secured by the machine is effectively unsecured on that share of the invoice.

Soft credit pull — A credit inquiry that leaves no mark on the score and is visible only to the person whose file it is. The only kind the application uses; the result is a signal that prompts questions, not a pass/fail gate.

Specific offer — A written statement of the terms on which a provider is prepared to fund a particular recipient — amount, cost, term and payments — as distinct from marketing or a pre-qualification. The event that triggers disclosure in New York, California, Virginia and Texas; Utah, Florida, Kansas, Missouri and Louisiana key the duty to consummation instead.

Specified percentage — The share of the business’s receipts the funder has purchased — 15% of daily revenue in one reported agreement. The term that makes the arrangement a purchase of a stream rather than a fixed instalment: the expected term is derived from it, and when receipts fall short the term extends rather than the remittance defaulting.

Springing guarantee — A guarantee imposing no liability until a defined bad act occurs — diverting receipts, transferring assets without consent, misrepresenting the business — at which point liability attaches to the whole obligation. The trigger list is the entire instrument.

Stacking — Taking a second, third or fourth funding position on top of an existing one rather than replacing it, each with its own remittance against unchanged revenue. The mechanism that does the most damage in this industry.

Statement window — The span of days the evidence covers. For PDF statements it is the statement periods supplied, which close on a calendar boundary; for a link it is the number of days requested, counted back from the day of connection — 90 by default and at most 730 for Plaid’s Transactions product.

Steady-state retainage — The amount of retainage permanently outstanding for a company that continuously starts and finishes work: annual revenue × retention rate × release lag. A standing balance-sheet position, replenished as fast as it is released.

Stipulation — A condition attached to an approval that must be satisfied before funds are released. Written by the underwriter at the same moment as the amount, so it exists before the applicant is told the file is approved. Sort the list by who owns each item: the ones owned by another funder are the ones that cost a day.

Structural loss — A business that spends more than it makes in a normal month. Borrowing adds a payment to it, so the next shortfall is larger by exactly the new debt service; over two or three rounds an operating problem becomes an insolvency.

Subordination — An agreement by an existing secured party to rank behind a new one, generally or as to specific collateral, without terminating its own filing. The middle path between a decline and a payoff.

Subordination agreement — An agreement, usually by an owner who has lent to the company, not to be repaid ahead of the surety's interest, which reclassifies that debt out of current liabilities for the surety's calculation.

Surety bond — A three-party instrument in which the surety guarantees to the project owner that the contractor will perform or pay, and the contractor indemnifies the surety for anything it pays out. Insurance for the customer, bought and personally guaranteed by the contractor.

Surety-adjusted working capital — Current assets less current liabilities after the surety's adjustments: long-dated retainage, aged receivables, related-party balances and other slow assets discounted or excluded. The figure that sizes bonding capacity, and typically 20% to 40% below the balance-sheet figure.

Sustainable growth rate — The fastest a business can grow its revenue from retained profit alone, without new outside capital or a change in how it is financed. For a small firm whose capital is its working capital: (share of profit retained × net margin × 365) ÷ ((1 − net margin) × cash conversion cycle in days). Named by Higgins in 1977 for the corporate case.

Temporary reduction — A lower daily or weekly remittance for a defined period, with the term extending to deliver the unchanged purchased amount. The most commonly granted structure change, because it costs the funder time rather than money.

Term loan — A single lump sum repaid with interest on a fixed schedule over a set term. Interest accrues on the declining balance, so early repayment genuinely saves money.

The three-blank test — "This money buys ______, which returns ______ by ______." A specific thing, a specific return, a specific date. Capital that fills the blanks credibly is usually worth taking; capital that cannot is postponing a decision.

Thin file — A statement window with little history behind it, in which every data point carries more weight — a clean overdraft record or an unexplained anomaly moves a four-month file more than a three-year one.

Timing gap — A shortfall in which the revenue exists and arrives later than the expense — a contract that pays in sixty days, a seasonal ramp, retainage held. What working capital funding is for.

Trade experience — One supplier's or lender's report to a commercial bureau of what it extended to a business, how much, and how the business paid relative to the terms it was given. A commercial file is built from these, which is why it records reports rather than payments.

Tradeline — An account that reports its payment history to a credit bureau. Only reporting accounts build a file, and most small suppliers do not report unless asked.

Transaction finance — Capital tied to a single identified transaction from order to invoice, as against working capital, which funds the operating cycle generally. The persistent attempt to use the first as the second explains most of the disappointment around the product.

Transfer churn — Money moved between a business's own accounts. It inflates apparent deposits and is netted out in underwriting, so it clouds the file without helping it.

Tri-party structure — The money flow of purchase order financing: the financier pays the supplier against one confirmed order, the buyer pays the financier on the resulting invoice, and the borrower who holds the order receives what remains once the financier has recovered its payment and fee.

Trough — The lowest-revenue stretch of a seasonal year — the month or months a remittance sized at the peak still has to clear.

UCC-3 termination — The filing that ends a financing statement's effectiveness. Once nothing is owed, the secured party must file or send one within twenty days of the debtor's written demand.

Under-billing — Costs and estimated earnings in excess of billings: more earned than invoiced. A balance-sheet asset, and money the contractor has paid for labour and material not yet billed to anyone.

Upfront guaranty fee — The fee the SBA charges the lender on each 7(a) loan, set for each fiscal year by notice as a percentage of the guaranteed portion, which the lender may pass on to the borrower. Distinct from the lender's annual service fee on the outstanding guaranteed balance, which cannot be charged to the borrower.

Useful life — The period over which an asset is expected to earn. A sound equipment facility keeps its term inside it, so the payment ends before the asset stops producing.

Utilization break-even — The months of use per year at which the annual ownership cost of a machine equals what renting it for those months would cost: annual ownership cost ÷ monthly rental rate. Below it renting is cheaper; above it owning is.

Validity guarantee — A guarantee, common in receivables financing, that the receivables are real — genuinely owed, not already sold, not subject to an undisclosed dispute — rather than a guarantee that the customer pays.

Vendor management system (VMS) — A platform, often run by a managed service provider, that sits between an agency and its end client with its own approval and remittance cycle and frequently its own payment terms, which govern over those negotiated with the client.

Verifiable revenue — Deposits an underwriter can see in the statements, net of transfers between the business's own accounts and of any funding proceeds — not invoices, and not the profit and loss.

Window position — Where a four-month statement window falls against the shape of a seasonal year. Every position either contains the trough, which sizes the offer down to it, or the fall off the peak, which reads as declining revenue — so there is no clean window, only a choice of which defect to explain.

WIP schedule — One row per open job: revised contract value, estimated total cost, cost to date, percent complete, revenue earned, billed to date, and the over- or under-billed difference between earned and billed.

Wire cutoff — The time after which a wire cannot reliably be reviewed, decisioned, documented, signed, released and processed by the receiving bank the same day. 2pm ET here — a banking constraint rather than an office convention.

Work in process — Materials a manufacturer has started to transform but not yet finished. It has lost the independent identity of the raw materials and not yet gained that of the finished product, which makes it difficult to value and hard for a funder to realise if an order fails mid-run.

Working capital — Current assets less current liabilities: cash, receivables and inventory, minus everything owed within twelve months. Often called net working capital; ask which is meant.

Working-capital intensity — The cents of working capital each dollar of annual revenue keeps tied up in the cycle: (1 − net margin) × cash conversion cycle in days ÷ 365. A 6% business with a 73-day cycle has an intensity of 0.188; growth of any amount consumes that share of the new revenue before the new revenue pays.

Workout — A written agreement on a materially reduced schedule against current reality, reached when the revenue that supported the original structure is gone rather than late.

Worst-week test — Set the proposed remittance against the worst normal week of the last year — not the average week — and confirm it clears with room. The check that decides whether an amount is right regardless of what was approved.