Business / Loan Glossary

Accounts Receivable Financing: A loan gained by borrowing against receivables. Loans are paid down as receivables are collected.

Adjustable Rate Loan (ARL): A loan with an interest rate that changes during the term of the loan. The payments generally increase or decrease with the interest rate. Rate is based on one of several 'index' options.

Adjustable Rate Mortgage (ARM): A loan with an interest rate that changes during the term of the loan. The payments generally increase or decrease with the interest rate. Rate is based on one of several 'index' options.

Amortize: Payoff off a debt in installments which includes both principal and interest.

Amount Financed: A required Truth in Lending Act disclosure for consumer loans. It is calculated by starting with the full amount borrowed (principal) and subtracting out the dollar amount of prepaid finance . . . View Full Definition

Annual Fee: The amount charged by the lender each year to cover the administrative costs of the loan.

Annual Percentage Rate (APR): A required Truth in Lending Act disclosure for consumer loans. It is a calculation of the cost of credit as a yearly rate and shown as a percentage. It is often higher than the interest rate . . . View Full Definition

Application Fee: A fee charged by the lender or broker for the loan application.

Appraiser: A person typically hired by a lender to provide an appraisal.

Arbitration: A privately conducted trial to resolve a dispute. Arbitration can be binding (in which case there is no appeal), or non-binding, in which an appeal may be possible.

Assets: Anything of value. Any interest in real or personal property which can be appropriated for the payment of debt.

Bad Debt: A debt that is not collectible and is therefore worthless to the creditor.

Balance Sheet: Financial statement presenting measures of the assets, liabilities and owner's equity or net worth of business firm or nonprofit organization as of a specific moment in time.

Balloon Payment: A scheduled payment due at the end of a loan term that is substantially greater than the regular monthly payments. This may be a very large payment. It is designed to occur when the regular . . . View Full Definition

Borrower: A person who receives funds in the form of a loan with the obligation to repay the loan in full.

Bridge Loan: Short-term loan to provide temporary financing until more permanent financing is available.

Broker Agreement: A contract between a borrower and a mortgage broker. It describes what the broker will do for the borrower, and the terms of the agreement, including compensation.

Broker Compensation Or Fee: The amount of money the broker will receive for finding a loan for a borrower. This may be an amount paid by the borrower, an amount paid by the lender or a combination of the two.

Business Credit Card: An amount of money, which a business can borrow against at times it needs capital. Using a card accesses the money.

Business Plan: A document that describes an organization's current status and plans for several years into the future. It generally projects future opportunities for the organization and maps the financial . . . View Full Definition

Capital: Broadly, all the money and other property of a corporation or other enterprise used in transacting its business.

Capital Markets: Those financial markets, including institutions and individuals, that exchange securities, especially long-term debt instruments.

Capitalization: Long-term debt, preferred stock and net worth. The loan capital of a community development loan fund; includes that which has been borrowed from and is repayable to third parties as well as . . . View Full Definition

Cash Flow Financing: Short-term loan providing additional cash to cover cash shortfalls in anticipation of revenue, such as the payment(s) of receivables.

Cash-Out Refinancing Loan: A loan that refinances a prior mortgage and that provides additional cash to the borrower. Funds.

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