Business funding glossary
51 terms you’ll see in funding offers and merchant statements — explained in plain English.
- ACH (Automated Clearing House)
- The US electronic network that moves money between bank accounts. Most funding payments are collected by ACH debit on a daily, weekly or monthly schedule. Learn more →
- APR (Annual Percentage Rate)
- The yearly cost of borrowing expressed as a percentage, including interest and certain fees. Useful for comparing loans; MCAs are not loans and are usually quoted with a factor rate instead. Learn more →
- Advance amount
- The lump sum you receive from a merchant cash advance before any fees are deducted. Learn more →
- Amortization
- Paying off a loan through scheduled payments that cover both interest and principal, so the balance reaches zero at the end of the term. Learn more →
- Average daily balance
- The average amount in your business bank account each day over a statement period. Underwriters use it to gauge cushion and payment capacity. Learn more →
- Bank statement underwriting
- Approving funding mainly from recent business bank statements — deposits, balances and activity — rather than tax returns or financial statements. Learn more →
- Broker
- A company that connects businesses with funding partners and helps compare offers, rather than lending its own money. Fidelity Funding is a broker. Learn more →
- Business line of credit
- A revolving credit limit you can draw from as needed, paying interest only on what you use and regaining access as you repay. Learn more →
- Cash conversion cycle
- How long cash is tied up between paying for inventory or labor and collecting from customers: days inventory + days receivable − days payable. Learn more →
- Chargeback
- A card transaction reversed by the customer's bank after a dispute. Frequent chargebacks raise processing costs and can concern underwriters. Learn more →
- Collateral
- An asset pledged to secure financing, which the funder can claim if you don't repay — for example, the equipment in an equipment loan. Learn more →
- Confession of judgment
- A contract clause in which a borrower agrees in advance to a court judgment if they default. Its enforceability varies by state; read contracts carefully and consult an attorney. Learn more →
- Consolidation
- Combining several advances or loans into one, usually to reduce the number or size of payments. It can lower or raise total cost depending on terms. Learn more →
- Cost of capital
- The total dollar cost of funding: what you repay minus what you actually receive. Learn more →
- Credit utilization
- How much of your available credit you're using. Lower utilization generally helps credit scores. Learn more →
- Debt service coverage ratio (DSCR)
- Cash available for debt payments divided by required debt payments. A DSCR above 1.0 means income covers payments. Learn more →
- EIN (Employer Identification Number)
- The IRS tax ID for a business, used on funding applications in place of an owner's SSN for the business itself. Learn more →
- Early payoff discount
- A reduction in the remaining balance offered by some MCA funders if you repay early. Not every contract includes one — ask before signing. Learn more →
- Effective rate (processing)
- Total card-processing fees divided by total card volume for a period — the clearest measure of what accepting cards costs you. Learn more →
- Equipment financing
- Financing for vehicles, machinery or technology where the equipment typically serves as collateral. Learn more →
- Factor rate
- A multiplier used to price merchant cash advances. Advance × factor rate = total payback; a $50,000 advance at 1.30 repays $65,000. Learn more →
- Factoring (invoice)
- Selling unpaid customer invoices to a factoring company for an immediate advance, minus a fee. Learn more →
- Hard credit pull
- A credit inquiry that can affect your credit score, usually performed when you move forward with a specific funder. Learn more →
- Holdback
- The percentage of daily card sales withheld to repay a merchant cash advance in split-funding arrangements. Learn more →
- Interchange
- The fee card-issuing banks charge on each card transaction — the largest part of processing costs, set by the card networks. Learn more →
- Interchange-plus pricing
- A processing pricing model that passes interchange through at cost and adds a disclosed markup, making true costs easier to see. Learn more →
- Merchant cash advance (MCA)
- A purchase of a portion of your future sales for an upfront lump sum, repaid through a share of receipts or fixed ACH debits. Learn more →
- Merchant statement
- The monthly report from your card processor showing volume, transactions and every fee charged. Learn more →
- NSF (non-sufficient funds)
- A payment returned because the account didn't have enough money. Frequent NSFs can weaken a funding application. Learn more →
- Negative days
- Days your business bank account balance falls below zero. Underwriters watch them closely. Learn more →
- Net proceeds
- The amount that actually reaches your account after origination or other upfront fees are subtracted. Learn more →
- Origination fee
- An upfront fee charged for setting up financing, often deducted from the amount funded. Learn more →
- PCI DSS
- The Payment Card Industry Data Security Standard — security requirements for any business that accepts card payments. Learn more →
- Personal guarantee
- A promise by a business owner to be personally responsible for repaying business funding if the business can't. Learn more →
- Position
- An MCA's place in line when a business has more than one advance — first position, second position, and so on. Learn more →
- Prepayment penalty
- A fee some loans charge if you repay early. Ask whether one applies before you sign. Learn more →
- Purchase order financing
- Funding that pays your supplier so you can fulfill a confirmed customer order. Learn more →
- Reconciliation
- A contract provision allowing MCA payments to be adjusted to reflect actual sales if revenue drops. Learn more →
- Renewal
- Additional funding offered after you've repaid a meaningful share of an existing advance or loan. Learn more →
- Revenue-based financing
- Funding repaid as a share of future revenue, so payments rise and fall with sales. Learn more →
- SBA loan
- A loan made by a lender and partially guaranteed by the US Small Business Administration, such as the 7(a) and 504 programs. Often low-cost but slower to close. Learn more →
- Soft credit pull
- A credit check that doesn't affect your credit score. Fidelity's initial review uses a soft pull. Learn more →
- Stacking
- Taking a new merchant cash advance while existing ones are still being repaid, which can quickly strain cash flow. Learn more →
- Surcharging
- Adding a fee to card transactions to offset processing costs. Rules vary by state and card network. Learn more →
- Term
- The length of time over which funding is repaid. Learn more →
- Time in business
- How long your business has been operating — a key underwriting factor. Learn more →
- Total payback
- The full amount you'll repay over the life of the funding, including all costs. Learn more →
- UCC-1 filing
- A public notice filed by a funder claiming a security interest in business assets. Learn more →
- Underwriting
- The funder's review of your business's revenue, history and risk to decide whether to fund and on what terms. Learn more →
- Unsecured funding
- Financing without specific collateral, often backed by a personal guarantee instead. Learn more →
- Working capital
- Current assets minus current liabilities — the cash available to run day-to-day operations. Learn more →
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