Business Funding Glossary
All funding and finance terms explained in plain English
APR (Annual Percentage Rate)
The yearly cost of borrowing money, expressed as a percentage. Includes interest rate plus fees. Example: £10,000 loan at 10% APR means you'll pay roughly £1,000 in interest over one year.
Asset Finance
Funding used to purchase specific business assets like vehicles, machinery, or equipment. The asset itself serves as collateral. Typical rates: 8-15% APR.
Bridging Finance
Short-term funding (usually 1-24 months) to "bridge" a temporary cash flow gap until longer-term finance or revenue arrives. Common use: awaiting property sale or large invoice payment.
CCJ (County Court Judgment)
A court order made against you if you don't pay money you owe. Stays on credit file for 6 years. Having CCJs makes traditional lending harder but alternative lenders (MCAs) may still approve.
Collateral
Assets you pledge as security for a loan. If you don't repay, the lender can seize the collateral. Examples: property, vehicles, equipment. MCAs typically don't require collateral.
Credit Score
A number (300-850) representing your creditworthiness based on past borrowing behavior. 680+ is good for business lending. Below 600 is poor. MCAs are less dependent on credit scores than traditional loans.
Daily Withholding
The automatic deduction from your card sales each day to repay an MCA. Example: 15% withholding means if you take £1,000 in cards, £150 goes to MCA repayment, you receive £850.
Early Termination Fee (ETF)
A penalty charged if you cancel a contract before the end date. Common with card machine contracts. Can be £500-£2,000+ depending on contract length remaining.
Factor Rate
Used in MCAs instead of APR. A multiplier (typically 1.1-1.6) that determines total repayment. Example: £20,000 advance × 1.35 factor = £27,000 total repayment (£7,000 cost).
Holdback Percentage
The percentage of card sales withheld for MCA repayment. Typically 10-20%. Example: 15% holdback on £50,000 monthly card sales = £7,500/month to MCA.
Invoice Financing
Funding against outstanding customer invoices. Receive up to 90% of invoice value immediately, pay fee (1.5-3.5%/month), balance paid when customer pays. Also called factoring or invoice discounting.
Merchant Cash Advance (MCA)
Business funding repaid from a percentage of future card sales. Not technically a loan - you're selling future receivables. Fast approval (24 hours), based on card volume not credit score.
MMSC (Minimum Monthly Service Charge)
The minimum fee you'll pay monthly for card processing, even if transaction fees don't reach this amount. Example: £25 MMSC means you pay minimum £25/month regardless of volume.
Personal Guarantee
A promise that you'll personally repay a business debt if the company can't. Puts your personal assets (home, savings) at risk. Most MCAs don't require personal guarantees.
Revenue-Based Financing (RBF)
Similar to MCA but based on total revenue (not just cards). You repay a percentage (3-8%) of monthly revenue until reaching a cap (typically 1.2-1.5× borrowed amount).
Secured Loan
A loan backed by collateral (assets). If you default, lender seizes the asset. Lower rates than unsecured loans because lender has security. Example: vehicle finance secured by the vehicle.
Start Up Loans
UK government scheme offering £500-£25,000 to new businesses at 6% APR. Includes 12 months free mentoring. Available to businesses under 24 months old. Apply at startuploans.co.uk.
Unsecured Loan
A loan not backed by collateral. Lender relies on your creditworthiness and business performance. Higher rates than secured loans (10-25% APR typical) but no assets at risk.
Working Capital
Money available for day-to-day operations. Calculated as: Current Assets - Current Liabilities. Healthy businesses maintain 3-6 months expenses in working capital.
Still Have Questions?
Our funding experts can explain any terms and help you find the right option