Financing glossary.

Fixed daily or weekly debit from a borrower's bank account used to repay an MCA or short-term loan.

Unlike a percentage-of-sales split, an ACH holdback withdraws a flat dollar amount on a set schedule regardless of revenue. Faster to underwrite, less flexible for the borrower in slow weeks.

Percentage of a collateral asset's value a lender will lend against.

Common advance rates: 80–90% on eligible AR, 50–70% on inventory, 50–80% on equipment forced-liquidation value. Lower advance rates leave more borrowing-base cushion.

True annualized cost of a loan including interest plus fees.

For comparison across products. A 1.30 factor-rate MCA paid over 6 months can carry an APR north of 80% even though the 'rate' looks low.

Revolving credit facility secured by working-capital assets — AR, inventory, sometimes equipment.

Borrowing base recalculated monthly. Pricing usually SOFR + 3–6%. Best for operators with strong receivables but inconsistent cash flow.

Pool of eligible collateral against which an ABL or factoring facility can advance.

Calculated as: (eligible AR × advance rate) + (eligible inventory × advance rate) − reserves. Re-cut every period to keep the facility right-sized.

Short-term financing (typically 6–24 months) used to close a gap before a permanent take-out.

Used for acquisitions, refinancings, and value-add real estate. Underwriting focuses on the exit — refinance, sale, or stabilization — as much as the entry.

Share of a borrower's revenue or AR coming from a single customer.

Most ABL lenders cap eligible AR concentration at 15–25% per obligor. Anything above is excluded from the borrowing base.

Clause that lets a lender obtain a judgment without a trial if the borrower defaults.

Banned in many states. A red-flag clause in stacked MCA contracts — it lets the lender freeze accounts on the same day of default.

Ongoing financial tests a borrower must satisfy throughout the loan's life.

Common: minimum DSCR, maximum leverage, minimum liquidity. A missed covenant doesn't always mean default — but it triggers a lender conversation.

Cash flow available for debt service divided by total debt service.

Lender comfort starts at 1.20×. CRE deals often want 1.25–1.35×. Below 1.0× means cash flow doesn't cover debt — automatic decline at most banks.

Loan or lease secured by the equipment being purchased.

Equipment serves as collateral, so credit requirements are softer. Terms 36–84 months. Pricing usually SOFR + 4–8%.

MCA pricing expressed as a multiplier (e.g. 1.30 means repay $130K on a $100K advance).

Not interest. To translate to APR: ((factor − 1) × 365) / repayment days. A 1.30 over 180 days ≈ 60% APR.

Selling AR to a factor at a discount in exchange for immediate cash.

Advance 80–90% on submission, balance (minus fee) on customer payment. Recourse factoring keeps credit risk with the borrower; non-recourse moves it to the factor.

The lender with the senior UCC lien — paid first if collateral is liquidated.

Stacking refers to taking second, third, or fourth-position MCAs behind a first. Each subsequent position commands higher pricing for higher risk.

Percentage of daily card-receipt revenue automatically diverted to repay an MCA.

Typical split holdback: 10–20% of daily card sales. Slow days mean smaller payments; busy days mean faster payoff.

Broker that sources commercial-finance deals and submits to lenders.

Compensated by commission from the lender — typically 3–10% of the funded amount, paid out of borrower fees.

Loan amount divided by collateral value.

CRE banks usually max at 65–75% LTV; bridge lenders 70–80%; hard money 60–70%. Lower LTV usually means lower pricing.

Working capital used by contractors to fund payroll and materials at the start of a new contract.

Repaid out of progress draws. Common structures: line of credit, AR-backed facility, or short-term loan tied to contract backlog.

Lump-sum purchase of a business's future revenue at a discount.

Legally not a loan — no interest, no APR disclosure required. Repaid via daily ACH or split holdback. Best for fast-cash, short-duration needs.

One-time fee charged at funding, usually 1–5% of principal.

Deducted from proceeds at close. Should be included in any APR comparison — a 'no fee' lender with a higher rate often costs more.

Owner's personal commitment to repay if the business cannot.

Required on most non-bank commercial loans below $5M. Usually full recourse; rarely limited to a percentage.

Taking on additional MCAs while existing ones are still being repaid.

Each new MCA is a 'position.' Most lenders will not fund a 4th or 5th position; stacking is the leading cause of small-business cash-flow collapse.

Indicative review of a borrower's profile against a lender's box — no credit pull.

Output: a range of rates, structures, and amounts the borrower is likely to qualify for. Used to triage before formal underwriting.

Portion (5–10%) of each construction progress payment held by the GC or owner until project close.

Major cash-flow drag for subs and GCs. Often financed via AR-backed lines or invoice financing.

MCA refinance that pays existing positions and replaces them with a single, lower daily payment.

Reduces daily debt burden but typically extends total payback and increases lifetime cost. Use selectively.

Selling owned equipment or property to a lender and leasing it back.

Unlocks equity in owned assets without a refinance. Common in fleet, manufacturing, and CRE.

Government-guaranteed loan originated by a bank under the SBA 7(a) or 504 program.

Lower rates, longer terms, but slower (45–90 days) and tighter underwriting. Best for established profitable businesses.

Credit inquiry that does not affect the borrower's credit score.

Used for pre-qualification. A hard pull (which does affect score) typically happens only at formal application.

Documents a lender requires before funding — bank statements, tax returns, AR aging, etc.

Common stip list: 4–6 months bank statements, driver's license, voided check, last 2 years tax returns. Faster stip turnaround = faster funding.

Permanent financing that pays off a bridge or interim loan.

Bridge lenders underwrite the take-out (refinance source, sale, or stabilization) as carefully as the bridge itself. No credible take-out = no bridge.

Fixed-amount loan with a scheduled amortization over 1–10 years.

Most predictable structure. Pricing depends heavily on credit profile — SOFR + 3% for prime borrowers, 12–25% for subprime.

Public notice filed under the Uniform Commercial Code claiming a lien on a borrower's collateral.

Visible in public records. Multiple UCC filings against a single business is the most common signal of MCA stacking.