Finance glossary
Business finance, in plain English.
The terms lenders use, explained without the jargon. If something on an offer still isn’t clear, ask your adviser: that’s what we’re here for.
- Advance
- The amount a lender pays you up front, particularly with a merchant cash advance or invoice finance.
- APR (annual percentage rate)
- The yearly cost of borrowing including interest and compulsory fees, expressed as a percentage. Useful for comparing offers of different lengths.
- Check a quote’s APR →
- Arrangement fee
- A one-off fee charged by a lender for setting up funding, often taken from the amount you receive.
- Broker
- A firm that introduces businesses to lenders and helps them through the process. A broker doesn’t lend its own money. BrightSky is a broker.
- How we’re paid →
- Commission
- What a lender pays a broker when a business takes funding it introduced. It can be a percentage of the amount borrowed or a fixed fee.
- Credit search (hard and soft)
- A check of your credit file. A soft search isn’t visible to other lenders; a hard search is recorded and can affect your score if you have many in a short time.
- Debenture
- A form of security giving a lender a claim over a company’s assets if it can’t repay. Usually registered at Companies House.
- Drawdown
- Taking funds from a facility you’ve been approved for, such as a revolving credit facility.
- Early repayment charge
- A fee some lenders charge if you settle borrowing before the end of the term. Always check before you sign.
- Factor rate
- A multiple showing how much you repay for each pound borrowed. A factor rate of 1.2 on £10,000 means repaying £12,000. Common with merchant cash advances.
- Merchant cash advance →
- Flat rate
- Interest charged on the full amount borrowed for the whole term, even as you repay it. It costs more than the same rate on a reducing balance.
- Holdback
- The percentage of each card sale that goes towards repaying a merchant cash advance.
- Invoice discounting
- Invoice finance where you keep collecting payments from your customers, usually confidentially.
- Invoice finance →
- Invoice factoring
- Invoice finance where the lender manages your sales ledger and collects payment from your customers.
- Open banking
- A secure, regulated way to share your bank transactions with a lender or broker, with your permission, without sending statements.
- Personal guarantee
- A director’s promise to repay the business’s borrowing personally if the business can’t. Most unsecured business lenders ask for one.
- Revolving credit facility
- A limit you can draw on, repay and draw on again, paying interest only on what you use.
- Revolving credit →
- Secured loan
- Borrowing backed by an asset, such as property or equipment, that the lender can claim if the loan isn’t repaid.
- Term
- How long you have to repay the borrowing.
- Total repayable
- Everything you’ll pay back over the term: the amount borrowed plus interest and charges. The clearest single number for comparing offers.
- Unsecured loan
- Borrowing that isn’t backed by a specific asset. Lenders usually rely on the business’s trading and a personal guarantee instead.
- Unsecured business loans →