Business Funding Glossary
Plain-English definitions of 33 business funding terms. Each entry says what the term means and why it matters when your business raises capital.
A
ACH Payment
An ACH payment is an electronic bank-to-bank transfer sent through the Automated Clearing House network. In business funding, ACH is how funds are deposited into a business bank account and how scheduled remittances are drawn back out of it.
Annual Revenue
Annual revenue is the total money a business brings in over a year, before expenses. Funding providers look at revenue because it shows what a business actually generates, which is why revenue-first approvals weigh sales more heavily than a credit score alone.
B
Bank Statements
Business bank statements are the monthly records of deposits and withdrawals in a business checking account. Recent statements are the fastest way to verify real revenue, because they show actual money in and out rather than projections. Sinai Capital verifies revenue with your last 4 months of business bank statements.
Business Line of Credit
A business line of credit is a set amount of capital a business can draw from as needed, repay, and draw from again. The business pays only on what it draws, which makes a line of credit useful for gaps and opportunities that do not arrive on a schedule. See business lines of credit.
Business Term Loan
A business term loan is a lump sum of capital repaid on a fixed schedule over a set period. The amount, the payment, and the payoff date are all known upfront, which makes term loans the most predictable way to fund a defined project. See term loans.
C
Cash Flow
Cash flow is the movement of money in and out of a business over a period of time. A business can be profitable on paper and still miss payroll if the cash arrives after the bills do, which is why funding decisions weigh cash flow heavily.
Collateral
Collateral is an asset a business pledges to secure financing. If the business cannot repay, the funder can claim the asset. Financing backed by pledged assets is called secured, and financing without them is called unsecured.
Credit Utilization
Credit utilization is the share of available credit a business or its owner is currently using. Heavy utilization can drag down a credit score even when the business is healthy, which is one reason revenue-based approvals look at monthly sales instead of relying on the score alone.
D
Daily Remittance
A daily remittance is a small automatic payment drawn from a business bank account each business day, instead of one large payment each month. Spreading repayment across the days a business earns revenue keeps any single payment small. Daily remittance is common in revenue-based financing. See revenue-based financing.
Debt Consolidation
Debt consolidation combines several existing balances into one new financing with a single payment. Businesses consolidate to simplify repayment and to replace a stack of separate obligations with one they can actually track.
Draw Period
A draw period is the window during which a business can pull funds from a line of credit. During the draw period the business can borrow, repay, and borrow again up to its limit. See business lines of credit.
E
Equipment Financing
Equipment financing is capital used to buy business equipment, where the equipment itself typically secures the financing. The machine, vehicle, or hardware goes to work generating revenue while it is being paid off.
F
Factor Rate
A factor rate is a multiplier that sets the total repayment on certain business funding, most often revenue-based financing. Multiply the amount funded by the factor rate and the result is the full amount to be repaid. Unlike an interest rate, a factor rate does not compound: the total cost is fixed at the start. See revenue-based financing.
Fixed Payment
A fixed payment is a repayment amount that stays the same for the life of the financing. Fixed payments make budgeting simple, because next month's obligation is identical to this month's.
Funding Amount
The funding amount is the capital a business actually receives. In revenue-first approvals, the funding amount is sized to what the business earns, so monthly sales determine how much a business qualifies for. Sinai Capital funds from $25K to $500K+.
H
Holdback
A holdback is the fixed share of revenue set aside as repayment in revenue-based financing. Because the holdback is a percentage of what comes in, repayment scales with the business: strong periods repay faster, slower periods repay less. See revenue-based financing.
I
Invoice Factoring
Invoice factoring is selling unpaid invoices to a third party at a discount to get cash now instead of waiting for customers to pay. Factoring turns money a business has already earned into money it can actually spend.
L
Lien
A lien is a legal claim against an asset that secures a debt. A funder holding a lien has a right to the asset if the debt goes unpaid. Liens on business assets are typically recorded publicly through a UCC filing.
M
Monthly Revenue
Monthly revenue is the money a business brings in during a single month. In revenue-based approvals, monthly revenue is the core underwriting input. Sinai Capital bases approval on your monthly sales, not just your credit score.
O
Origination
Origination is the process of setting up new financing: application, underwriting, approval, and disbursement of funds. When a provider charges an origination fee, it is a fee for that setup work, and it should be stated plainly in the funding agreement.
P
Personal Guarantee
A personal guarantee is a business owner's promise to repay financing personally if the business cannot. A guarantee makes the owner's commitment part of the agreement even when no specific asset is pledged as collateral.
Prepayment
Prepayment is paying off financing before the schedule requires. Some products reduce the total cost when paid early and others do not change the amount owed, so how prepayment is treated belongs on the list of questions to ask before signing.
R
Renewal
A renewal is a new round of funding extended to a business that has repaid, or nearly repaid, its current funding. Because the provider has already watched the business perform, a renewal usually moves faster than a first approval.
Revenue-Based Financing
Revenue-based financing is capital repaid as a share of a business's ongoing revenue rather than on a rigid loan schedule. Approval leans on monthly sales rather than credit score alone, which is why businesses with strong revenue and imperfect credit use it. See revenue-based financing.
Revolving Credit
Revolving credit is financing a business can use, repay, and use again without reapplying, up to a set limit. A business line of credit is the most common revolving product in business funding. See business lines of credit.
S
SBA Loan
An SBA loan is business financing partially guaranteed by the U.S. Small Business Administration and issued through approved financial institutions. The government guarantee lowers the issuer's risk, which is why SBA loans are known for favorable terms and for thorough, documentation-heavy underwriting.
Secured Financing
Secured financing is capital backed by collateral, an asset the funder can claim if the business does not repay. Pledging collateral typically improves the terms a business is offered, because the funder's risk is lower.
Soft Credit Pull
A soft credit pull is a credit check that does not affect the credit score, unlike a hard inquiry, which can. Applying to Sinai Capital does not affect your credit score.
T
Time in Business
Time in business is how long a company has been operating. Funding providers weigh it because a business with a track record is more predictable than a brand-new one. Requirements vary by product and provider.
U
UCC Filing
A UCC filing is a public notice, filed under the Uniform Commercial Code, that a funder holds a security interest in a business's assets. The filing puts other creditors on notice, and it is terminated once the obligation is satisfied.
Underwriting
Underwriting is how a funding provider evaluates a business before approving capital: what the business earns, how its cash flows, and how likely repayment is. In revenue-first underwriting, recent business bank statements do most of the talking.
Unsecured Financing
Unsecured financing is capital extended without specific collateral pledged against it. The funder relies on the strength of the business's revenue, and often a personal guarantee, instead of a claim on a particular asset.
W
Working Capital
Working capital is the money a business uses to run day to day: payroll, inventory, rent, and the gap between paying suppliers and getting paid. Working capital funding covers that gap so operations do not stall while revenue catches up. See working capital.
Still have questions?
Talk to a funding specialist at Sinai Capital, or apply and see your options. Applying does not affect your credit score.