Glossary

Asset – anything that an individual owns and that has value. Real estate, equipment, stocks and bonds are considers as assets.

Amortization – the process of repayment of loan amount over a term via monthly installments.

Business plan or projection – a document that contains the details about the business, company, its potential, cash flow projection and other relevant information.

Cash flow – a presentation showing the cash generated by the business after deducting the business expenses and loan repayments. A Cash flow projection will that the business will have the ability to make repayments on loans comfortably along with making other expenses and profit.

Collateral – any asset that is pledged for the repayment of the loan. Details about collateral are required to be provided with the loan application.

Credit score – a three digit number that carries the statistical summary about a borrower’s credit history. Credit score is the determining factor for lenders while deciding whether to provide loans or not.

Interest rate – the amount charged by the lender for amount borrower. Interest rate could be fixed or variable.

Loan term – the length of time in which the borrower has to repay the loan amount.

Financial report – documents providing information about the financial status of the business. Financial report includes income statement, cash inflow, balance sheet etc.

Loan agreement – document containing terms and conditions for borrowing money.

SBA – small business loans for small businesses that are unable to get financing from regular lending channels.

Secured loans: loans which require you to place a security or collateral for approval. The collateral is used to pay for the secured loan in case of non repayment.  

Unsecured loans – loans that are not guaranteed on any property or personal asset.

Variable interest rate – the interest rates that fluctuates according to the changes on an underlying interest rate.