Business / Loan Glossary

Negative Covenants: Statements of actions or events of the borrower must prevent from occurring or existing, for example, additional borrowing without the lender's consent.

Net Working Capital: Current assets minus current liabilities.

Net Worth: Total assets minus total liabilities. Aggregate net value of the organization.

Notice Of Right To Cancel: Under federal law, you may be permitted to cancel or 'rescind' a mortgage loan within a specified time, generally three days, after you have signed loan documents in a refinance, second mort . . . View Full Definition

Open-End Loan: A loan that permits the borrower to draw money from time to time up to a credit limit. A home equity line of credit (HELOC) is an open-end loan secured by a home.

Opportunity Cost: The potential benefit that is foregone from not following the best (financially optimal) alternative course of action.

Payment Schedule: This information on the Truth in Lending Disclosure Statement shows the amount of the first loan payment, the amount and number of the regularly scheduled payments (usually monthly), the amo . . . View Full Definition

Personal Guarantee: A guarantee that the primary owner will assume personal responsibility for repayment of the loan, should the company not repay the loan.

Points: A fee charged by the lender as additional compensation for making the loan. One 'point' is equal to 1% of the principal amount of the loan.

Portfolio: A combination of assets held for its investment benefits, including financial and non-financial returns. The asset mix is usually varied in kind and size to maintain an acceptable level of r . . . View Full Definition

Prepayment Penalty: The charge which can be imposed if you pay off your loan before maturity. The Truth in Lending Disclosure Statement will show whether a loan has a prepayment penalty.

Prime Loan: A loan offered to borrowers with better credit history (sometimes called 'A' loans). Prime loans generally are priced lower and cost the borrower less.

Prime Rate: The rate a lender charges its best customers. The rate is calculated differently by each lender.

Principal: In commercial law, the principal is the amount that is received, in the case of a loan, or the amount from which flows the interest.

Private Mortgage Insurance: Private Mortgage Insurance (PMI or MI)- Insurance required to be paid for by the borrower to protect the lender in the event payments are not made on time; most often required when the loam . . . View Full Definition

Processing Fee: A fee charged by lenders or brokers to prepare a complete loan application file. A processing fee may be charged to the borrower and shown on the Settlement Statement (HUD-1).

Program-Related Enterprise: A business or enterprise designed to promote the social purpose goals of an organization as well as generate revenue. Among nonprofits, products and services are usually, but not exclusively . . . View Full Definition

Program-Related Investment: Broad, functional definition: A method of providing support to an organization, consistent with program goals involving the potential return of capital within an established time frame. In t . . . View Full Definition

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