Business Funding Glossary
The funding world is full of jargon and acronyms nobody asked for. This glossary covers the terms you'll actually come across when looking at business funding options in the UK in 2026. Plain English, no waffle.
Definitions checked 7 September 2026 against the sources listed at the foot of this page.
Four words that change the price
Jargon in this market is not decoration. Nearly every term below changes what a facility costs or who can have it, and several of them are used loosely by people selling the product. Three worth pinning down before you read the rest.
A factor rate is not an interest rate. Borrow £10,000 at a factor rate of 1.2 and you repay £12,000, whether that takes six months or eighteen. Repay it in six and the effective annual cost is roughly double what it is over eighteen, which is why an early settlement discount matters far more on an advance than on a loan. On a loan, interest stops when the balance does.
A monthly rate is not a small annual rate. Bridging is quoted per month: across our panel of 53 bridging lenders, rates at 70% loan to value run 0.6% to 2% a month with a median of 0.9% (checked September 2026). A 0.9% monthly rate is not 0.9% a year. Add an arrangement fee of 1% to 4% and the day-one cost moves again.
A criterion is not a preference. When a lender says it needs a homeowning director or two years of trading, that is a hard filter, not a starting position. Of our 55 unsecured lenders, 21 will look at a business trading under a year and 24 accept minor adverse credit older than 24 months (checked September 2026). Knowing which list you are on saves an application.
Where a definition below quotes a number, it comes from our September 2026 check of 200+ lenders and 1,800+ products, or from the named public source. At £50,000 unsecured, for example, 47 lenders have a product covering the amount with a median published floor of 17% (checked September 2026). Panel composition changes, so treat every count as a guide rather than a promise.
Merchant Cash Advance (MCA)
A lump sum given to your business in exchange for a percentage of your future card sales. Repayments go up when you're busy and down when you're quiet. Not technically a loan.
Learn more →Factor Rate
The number used to calculate the total cost of a merchant cash advance. If you borrow £10,000 at a factor rate of 1.2, you repay £12,000 in total. It's not the same as an interest rate.
Learn more →APR (Annual Percentage Rate)
The yearly cost of borrowing, shown as a percentage. Used mainly for traditional loans and credit cards. MCAs don't typically use APR because repayment length varies with your sales.
Personal Guarantee (PG)
A promise that you'll personally repay the debt if your business can't. Most business funding providers require one. A personal guarantee means you are personally liable for the outstanding amount. While no property is typically taken as collateral, it is a serious financial commitment. Always read the full terms carefully.
Unsecured Funding
Funding that doesn't require you to put up property or assets as collateral. Most merchant cash advances are unsecured. However, a personal guarantee is still usually required, which creates personal liability.
Secured Funding
Funding where you offer an asset (like property or equipment) as security. If you can't repay, the lender can claim that asset. Usually comes with lower rates because the lender's risk is lower.
Revenue-Based Finance (RBF)
A type of funding where repayments are a fixed percentage of your monthly revenue. Similar to an MCA, but can be based on total revenue rather than just card sales.
Learn more →Term Loan
A lump sum you borrow and repay in fixed monthly instalments over a set period (the "term"). The amount you pay each month stays the same regardless of how your business is doing.
Soft Credit Check
A credit check that doesn't show up on your credit file and won't affect your credit score. Most MCA providers use these for initial assessments. You can apply without worrying about your score taking a hit.
Hard Credit Check
A credit check that does appear on your credit file. Too many in a short period can lower your score. Traditional lenders like banks usually run these before making a decision.
Holdback Percentage
The percentage of your daily or weekly card sales that goes towards repaying your MCA. If your holdback is 10% and you take £1,000 in card payments today, £100 goes to the lender.
Settlement Period
The time it takes for card payments to actually land in your bank account after a customer pays. Some providers offer next-day settlement, others take 2-3 working days.
Introducer
A company that connects businesses with lenders without arranging the credit itself. CapExpand Ltd is now a credit broker rather than an introducer: see Credit Broker below.
Underwriting
The process a lender goes through to decide whether to approve your application and on what terms. Each lender has its own underwriting model, which is why the same business can get different answers from different providers.
Risk Appetite
How much risk a lender is willing to take on. Every lender has a different risk appetite, which is why some approve businesses that others turn down. Think of it like car insurance: same driver, different quotes.
Advance Amount
The lump sum you receive upfront from an MCA provider. That's the amount before any fees or costs are added on top.
Total Repayable
The full amount you'll pay back, including the original advance plus all fees and costs. With an MCA, this is calculated by multiplying the advance by the factor rate.
Renewal / Top-Up
Once you've repaid a portion (usually 50-70%) of your existing advance, some providers let you take out additional funding on top. The terms may differ from your original agreement.
Daily Deduction
The amount taken from your card sales each day to repay your MCA. It's automatic. On days when you take fewer card payments, the deduction is smaller.
Funding Speed
How quickly money lands in your account after you're approved. In the UK business funding market in 2026, most MCA providers fund within 24 to 48 hours. Some offer same-day.
Minimum Trading History
The shortest time your business needs to have been trading before a lender will consider you. Ranges from 3 months (some MCA providers) to 2+ years (most term loan providers).
Minimum Card Turnover
The lowest monthly card sales a lender requires. Different providers have different thresholds. Some start as low as £1,500 per month, others need £10,000+.
PCI Compliance
Payment Card Industry Data Security Standard. Rules your business has to follow if you take card payments. When switching card machine providers, you need to make sure you stay compliant during the transition.
Interchange Fee
A fee charged by the card network (Visa, Mastercard) on every transaction. It's built into your card processing costs. The rate depends on the card type and whether the customer is present.
Interchange++
A transparent pricing model for card processing where you see the interchange fee, the card scheme fee, and the processor's markup separately. Often cheaper at higher volumes than flat-rate pricing.
Flat-Rate Pricing
A card processing pricing model where you pay the same percentage on every transaction regardless of card type. Simple to understand, but can work out more expensive at higher volumes.
Next-Day Payouts
When money from card payments lands in your bank account the following business day. Not all providers offer this. It makes a real difference to cash flow, especially for hospitality and retail.
Growth Guarantee Scheme (GGS)
A UK government-backed scheme that encourages lenders to provide finance to smaller businesses. The government guarantees a portion of the loan, which reduces the lender's risk.
Learn more →CCJ (County Court Judgment)
A court order that says you owe money. Having a CCJ on your record can make it harder to get traditional finance. Some MCA providers can still work with businesses that have CCJs.
Flexi-Loan
A loan where you can draw down and repay flexibly, a bit like an overdraft. You only pay interest on what you've actually borrowed. Providers like iwoca offer this type of product.
Broker Fee
A fee some brokers charge for arranging funding. CapExpand is a commercial finance broker and charges businesses no fees; we are paid by the lender when funding completes.
Drawdown
The act of taking money from an approved credit facility. With a flexi-loan, you might be approved for £50,000 but only draw down £20,000 initially.
Working Capital
The money your business uses to cover day-to-day expenses like rent, stock, wages, and bills. Many businesses use MCAs or short-term funding to top up their working capital.
Split Percentage
Another name for the holdback percentage on a merchant cash advance: the share of each day's card takings that goes to the funder. A 12% split on £1,000 of card sales sends £120 towards repayment that day.
Stacking
Taking a second merchant cash advance while a first is still being repaid. Two funders then deduct from the same card takings at once, which squeezes cash flow hard. Stacking sits behind many of the worst MCA outcomes, and reputable funders and introducers advise against it.
PDQ Machine
An older UK name for a card machine or card terminal ("Process Data Quickly"). If a supplier talks about a PDQ, they mean the physical device that takes card payments.
Acquirer
The bank or payment company that processes card payments on behalf of a business and settles the money into its bank account. Dojo, Worldpay, Barclaycard and Global Payments are acquirers or work with one. Your acquirer is who your card machine contract is really with.
Payment Gateway
The technology that passes an online card payment from a website to the acquirer for processing. Physical card machines don't need a separate gateway; online stores do.
Merchant ID (MID)
The unique number an acquirer assigns to a business's payment account. You'll need it when switching provider, querying transactions, or dealing with chargebacks.
Chargeback
When a cardholder disputes a payment and their bank claws the money back from the business, pending investigation. Excessive chargebacks can lead to higher fees, a rolling reserve, or account termination.
Rolling Reserve
A percentage of card takings an acquirer holds back for a period (often to cover potential chargebacks) before releasing it to the business. It reduces the cash you receive day to day, so check whether one applies before signing.
PCI Compliance Fee
A monthly fee many card machine providers charge for security-standard (PCI DSS) compliance, plus a larger "non-compliance" fee if you don't complete their annual questionnaire. Completing the questionnaire usually removes the bigger charge — worth checking on every statement.
Invoice Factoring
Invoice finance where the funder advances most of an invoice's value and also takes over collecting payment from your customers. Customers know a funder is involved.
Learn more →Invoice Discounting
Invoice finance where the funder advances against unpaid invoices but you keep collecting payment yourself, so customers don't know a funder is involved. Usually needs stronger financials than factoring.
Learn more →Arrangement Fee
A one-off fee some lenders charge for setting up a facility, either paid upfront or added to the balance. Always ask whether the quoted repayment includes it.
Early Settlement
Repaying a facility before the end of its term. On interest-bearing loans this usually saves money (check for early repayment charges). On an MCA it usually doesn't — the factor-rate cost is fixed from day one.
Debenture
A charge a lender registers over a company's assets as security, visible at Companies House. Common with invoice finance and larger facilities. It ranks the lender ahead of unsecured creditors if the company fails.
Loan-to-Value (LTV)
The size of a property loan as a percentage of the property's value. A £150,000 loan on a £200,000 property is 75% LTV. Lower LTV generally means better pricing on commercial mortgages and bridging.
Bridging Exit
The plan for repaying a bridging loan at the end of its short term — usually a sale or a refinance onto a mortgage. Lenders assess the exit as closely as the loan itself; a weak exit is the main reason bridging applications fail.
Learn more →Balloon Payment
A larger final payment at the end of some asset finance agreements, in exchange for lower monthly payments during the term. Common in vehicle finance.
HMRC Time to Pay
An instalment arrangement agreed directly with HMRC to spread a tax bill (VAT, PAYE, corporation tax). HMRC agrees these regularly for businesses that ask before the deadline with a realistic proposal. Interest applies, but penalties are usually avoided.
Learn more →Open Banking
A secure, regulated way to share read-only bank transaction data with a lender during an application, instead of sending PDF statements. Speeds up decisions; you approve access through your own banking app.
Credit Broker
A firm that arranges regulated credit between borrowers and lenders, an activity that requires FCA authorisation. Distinct from an introducer making non-regulated business introductions — check any firm's status on the FCA register at register.fca.org.uk.
Appointed Representative (AR)
A firm that carries on regulated activities under the responsibility of an FCA-authorised "principal" firm rather than holding its own authorisation. The principal appears on the FCA register with its ARs listed against it.
FCA Register
The public register at register.fca.org.uk listing every firm authorised by the Financial Conduct Authority, including their permissions and any appointed representatives. The right place to verify any lender, broker, or principal firm.
EBITDA
Earnings before interest, tax, depreciation and amortisation. Treated as a rough proxy for the cash a business throws off, and it matters because cashflow lenders size a facility as a multiple of it rather than against an asset. ThinCats publishes leverage of up to four times EBITDA on its cashflow loans, which is a useful upper marker for the mid-market. Adjustments are where the argument happens: a lender will strip out one-off gains you would rather keep in.
Loan to Value (LTV)
The loan as a percentage of what the property is worth, and the single number that sets your deposit. On bridging it drives the price directly: our panel's monthly rates step up band by band, and the typical maximum sits around 70%. On commercial mortgages the panel's maximum spans 60% to 100% with a median of 75%, checked September 2026. Usually calculated against the lower of price and valuation.
Learn more →Loan to Cost (LTC)
On a development scheme, the facility as a percentage of total project cost, meaning land plus build plus fees. Across our development lenders it spans 60% to 100% with a median of 85%, checked September 2026. Read it beside loan to GDV rather than on its own: whichever binds first is the one that caps your borrowing.
Learn more →Loan to GDV
The facility as a percentage of gross development value, meaning what the finished scheme is expected to sell for. Our panel spans 55% to 80% with a median of 70%, checked September 2026. On a scheme with a thin margin this is almost always the constraint that binds, which is why an optimistic end valuation costs a developer more than an optimistic build cost does.
Learn more →Covenant
Two meanings, and confusing them is expensive. A financial covenant is a condition inside the facility agreement, such as maintaining a minimum level of cover on the repayments; breaching it can make the loan repayable on demand even while every payment has been made on time. The covenant strength of a tenant means how creditworthy they are, which is what an investment property lender is really assessing when it reads your lease.
Debt Service Cover Ratio (DSCR)
Net operating income divided by the loan payments over the same period. A lender wants headroom rather than a dead heat, so a ratio of 1.25 means income covers the payments a quarter over. It is the test that decides how much an investment property will support, and it bites hardest when rates rise, because the payments move while the rent does not.
Interest Cover Ratio (ICR)
The buy-to-let version of debt service cover: rent measured against the mortgage interest, and usually stress-tested at a rate above the one you are paying. Limited company borrowers are commonly assessed at around 125% rental cover, which is why an incorporated purchase often supports a larger loan than a personal one on the same property.
Learn more →Gearing
How much of a business is funded by debt rather than by its own equity, usually expressed as a percentage or a ratio. A lender reads it as the answer to one question: how much of the risk is already carried by somebody else. High gearing does not decline a case on its own, but it moves the decision onto cash generation, which is why a heavily geared business with strong, predictable receipts still gets funded and a lightly geared one with lumpy income sometimes does not.
Capital Employed
Total assets minus current liabilities: the money actually tied up in running the business. Return on capital employed, which divides operating profit by it, is the ratio a commercial lender uses to sanity-check whether a business earns enough from what it has to justify being given more. It is the reason two companies with identical turnover can get very different answers.
Enterprise Value
What a whole business is worth to a buyer, counting its debt and netting off its cash, as distinct from the value of its shares alone. It matters in funding when the money is for an acquisition or a management buyout, because the facility is sized against the target rather than against your own balance sheet.
Learn more →Amortisation
Repaying a balance gradually across the term, so each payment is part interest and part capital and the debt reaches zero at the end. Its opposite is an interest-only facility, where the payments cover the interest and the full balance falls due on the last day. The choice is a cash flow decision rather than a cost one, and on commercial property it is worth modelling both before you commit.
Learn more →Asset Finance
Funding secured on the equipment it is buying, so the lender's decision turns on whether it would be willing to own and resell that thing. That produces a wide spread of appetite across our 38 asset finance lenders at September 2026, from construction plant at one end to marine at the other. Splits into hire purchase, where you own the asset at the end, and leasing, where you pay for use.
Learn more →Real customers. Real reviews.
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Still got questions?
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Common questions
What is a factor rate in business funding?▼
A factor rate is the number used to calculate the total cost of a merchant cash advance. For example, a £10,000 advance at a factor rate of 1.2 means you repay £12,000 in total. It's not the same as an interest rate or APR.
What is the difference between a merchant cash advance and a business loan?▼
A merchant cash advance gives you a lump sum that you repay through a percentage of future card sales. A business loan gives you a lump sum that you repay in fixed monthly instalments. MCAs flex with your revenue, loans do not.
Does applying for business funding affect my credit score?▼
Most merchant cash advance providers use soft credit checks, which do not appear on your credit file. Traditional lenders like banks usually perform hard checks, which do appear. CapExpand will confirm the type of check before anything is submitted to a lender.