Business Lending Terms, Defined

This glossary defines the business and commercial lending terms borrowers ask about most — from MCA and factor rate to DSCR, SBA 7(a), holdback, UCC lien, and personal guarantee. Each definition is plain-English and free of rate claims. Slate Financial is a commercial-lending brokerage that matches business owners to the right lenders — and we believe you should understand the terms before you sign anything.

Key terms A–Z

Merchant Cash Advance (MCA)

A Merchant Cash Advance is not a loan but the purchase of a portion of a business's future sales at a discount, repaid through small daily or weekly debits tied to revenue. It funds fast and is revenue-based rather than credit-based, which is why its cost of capital is typically higher than a traditional loan.

Factor Rate

A factor rate is a decimal multiplier (for example, 1.20) used to express the total cost of an MCA or short-term advance instead of an interest rate. You multiply the amount advanced by the factor rate to find the total amount you repay; it does not decline as you pay down the balance the way interest does.

DSCR (Debt Service Coverage Ratio)

DSCR measures how much income a property or business generates relative to its debt payments, calculated by dividing net operating income (or rent) by the total debt payment. A DSCR of 1.25 means there is 25% more income than is needed to cover the payment; lenders use it to confirm a deal can support the debt.

SBA 7(a) Loan

The SBA 7(a) is the U.S. Small Business Administration's flagship loan program, in which a participating lender funds the loan and the SBA guarantees a portion to reduce the lender's risk. It is used for working capital, equipment, real estate, and acquisitions, typically with longer terms and more documentation than alternative financing.

Term Loan

A term loan provides a lump sum of capital upfront that is repaid over a fixed schedule, usually with set monthly payments. The predictable structure makes it well suited to defined, one-time expenses such as expansion, equipment, or refinancing existing debt.

Line of Credit

A business line of credit is a revolving pool of funds you can draw from as needed, repay, and draw again, paying interest only on the amount you actually use. It is designed for ongoing or fluctuating needs like managing cash flow gaps and seasonal swings rather than a single fixed expense.

Holdback

A holdback is the fixed percentage of a business's daily card sales or bank deposits that an MCA provider automatically withholds toward repayment. Because it is a percentage of revenue, the dollar amount collected rises and falls with how much the business takes in.

UCC Lien

A UCC lien is a public filing (under the Uniform Commercial Code) that a lender records to claim a security interest in some or all of a business's assets. It signals that the lender has a legal claim if the business defaults; once a financing is paid off, the lender releases the filing.

Time in Business

Time in business is how long a company has been operating, usually measured from its formation or registration date. Lenders use it as a baseline qualification factor — longer operating history generally opens more programs and better terms, though some products are available to newer businesses.

Working Capital

Working capital is the money a business has available to cover its day-to-day operating expenses such as payroll, rent, inventory, and supplies. Working capital financing provides short-term funds to bridge cash flow gaps or seize timely opportunities rather than funding long-term assets.

Bridge Loan

A bridge loan is short-term financing used to cover a gap until longer-term funding or a sale closes — for example, acquiring or repositioning a property before refinancing into permanent debt. It funds quickly and flexibly but is meant to be replaced or repaid within a short window.

LTV (Loan-to-Value)

Loan-to-Value is the ratio of the loan amount to the value of the asset securing it, expressed as a percentage. A lower LTV means the borrower has more equity in the asset, which generally reduces the lender's risk and can improve the terms offered.

Personal Guarantee

A personal guarantee is a promise by a business owner to be personally responsible for repaying a business debt if the company cannot. It puts the owner's personal assets at stake and is required by many lenders, especially for unsecured or newer-business financing.

Definitions are general and educational. Slate Financial is a lending brokerage, not a direct lender — exact structures, qualifications, and terms vary by lender and your business profile. Pre-qualification uses a soft credit pull that does not affect your score and is not a guarantee of approval.

Ready to match these terms to real funding?

Now that you know the language, see which products fit your business. Slate matches you across our lender network and explains every term on your offer before you commit.