Commercial financing glossary

Forty terms a lender or an intermediary uses, defined in plain words. These are general definitions, not legal or financial advice.

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The parties and the mandate

Financing intermediary: A financing intermediary is a business that prepares another business’s file and presents it to lenders, without lending itself. Capital Facile is an intermediary, not a lender: each lender decides.; Answer: Intermediary or lender
Commercial lender: A commercial lender is a business that lends its own funds to businesses and makes the credit decision. It sets the amount, the cost and the terms in its written offer.; Answer: One lender or several
Mandate: A mandate is the written document by which a business instructs an intermediary to prepare its file and present it to lenders. At Capital Facile, it is signed before the file is presented to a lender.; Answer: Signing the mandate
Exclusive mandate: The mandate is exclusive: for its term, you go through Capital Facile for this financing request. Its term is written in the mandate.; Answer: Signing the mandate
Written offer: A written offer is the document in which a lender sets the amount, the cost, the repayment schedule and the security it asks for. The business reads it and decides; it is free to refuse it.

The products

Revenue-based financing: Revenue-based financing is a sum a lender pays out to a business, measured against its deposits, which the business repays out of its revenue. The amount, the cost and the repayment schedule are set by the lender in its written offer.; Answer: Revenue-based financing
Business line of credit: A business line of credit is a limit set by a lender, which the business draws on and repays as needed. Interest applies to the amount in use, and what is repaid becomes available again.; Answer: Business line of credit
Term loan: A term loan is a sum paid out once and repaid in instalments, on a fixed schedule, until the end of an agreed period. The lender sets its cost and its terms in its written offer.; Answer: Line of credit or term loan
Equipment financing: Equipment financing is a loan used to buy a machine, a work vehicle or tooling, new or used. The equipment itself generally serves as security for the lender.; Answer: Equipment financing
Lease (crédit-bail): A lease is a contract by which a business rents equipment for an agreed term, the lessor remaining its owner during the lease. What happens at the end of the lease is written in the contract.; Answer: Equipment financing or leasing
Factoring: Factoring is the assignment to a lender of an invoice owed by a business customer, in exchange for part of its amount before the customer pays. The rest is paid when the customer pays, less the lender’s fees.; Answer: Invoice factoring
Account receivable: An account receivable is a sum a customer owes the business for a sale or a service already invoiced. Receivables owed by other businesses are what factoring finances.; Answer: Factoring or line of credit

The account and liquidity

Working capital: Working capital is the money a business has on hand to pay its running expenses, such as payroll, rent and suppliers. It drops when expenses go out before sales are collected.; Answer: Working capital
Cash flow: Cash flow is the money coming into and going out of a business over a given period. A lender reads in it what the business can repay.
Monthly deposits: Monthly deposits are the sums that come into the business’s bank account over a month. They are what a lender reads first in the statements, month by month.; Answer: Bank statements
Business bank statement: A business bank statement is the document from a financial institution that lists the transactions and the balances of the business’s account for a month. A lender reads in it the deposits, the balances and the returned payments.; Answer: Who sees your statements
Overdraft: An overdraft is the state of a bank account whose balance has gone below zero. A lender counts the days the account spends there.
NSF cheque (non-sufficient funds): An NSF cheque is a cheque or a payment returned because the account did not hold the sum when it was presented. The statement flags it, often with the words "non-sufficient funds".

Security and credit

Personal guarantee: A personal guarantee is the commitment of a person, often the owner, to repay the lender if the business does not. Its scope is written in the lender’s offer.; Answer: Personal guarantee
Security (on the business’s assets): Security is a right a lender holds over assets of the business, for example the financed equipment or the accounts receivable, for as long as the financing is not repaid. The lender states what it asks for in its written offer.; Answer: Personal guarantee
Immovable hypothec (mortgage): An immovable hypothec is a right a lender holds over a building or land, in support of the repayment of a loan. The financing Capital Facile presents does not require one; the lender may ask for a personal guarantee or security on the business’s assets.; Answer: Property as collateral
Credit file: A credit file is the history of the borrowings and payments of a person or a business, kept by a credit reporting agency. A lender may consult it before making an offer, only with your authorization.; Answer: Imperfect credit
Credit score: A credit score is a rating, calculated from the credit file, that sums up how a person or a business has repaid its debts. Each lender gives it the weight it wants in its decision.; Answer: Imperfect credit
Consent (Law 25): Consent is the authorization a person gives for their personal information to be collected, used or disclosed for a specific purpose. In Québec, Law 25 governs it; on our site, each consent is a separate box, never ticked in advance.; Answer: Who sees your statements

The business

NEQ: The NEQ, or Québec enterprise number, is the identifier assigned to a business registered in Québec’s enterprise register. It identifies the business in its dealings with government departments and bodies.
Incorporated business: An incorporated business is a corporation: a legal person distinct from its owners, with its own assets and its own debts.
Sole proprietorship: A sole proprietorship is a business operated by one person, with no separate legal person. Its owner answers personally for the debts of the business.; Answer: Unincorporated business
Partnership: A partnership is a business that two or more people operate together under a contract, without forming a corporation. The partners’ liability depends on the form of partnership chosen.; Answer: Unincorporated business

Repayment

Pre-authorized debit: A pre-authorized debit is a withdrawal the business authorizes a creditor in advance to make from its bank account, on agreed dates. The payments on a financing are often made this way.
Repayment schedule: A repayment schedule is the list of payments to be made, with their amount and their date, until repayment is complete. The lender sets it in its written offer.
Total cost of financing: The total cost of financing is everything the business pays on top of the sum the lender pays out: interest and the lender’s fees. It is written in the lender’s offer; Capital Facile’s fee is added to it and is payable only if financing is disbursed.
Principal: The principal is the borrowed sum that remains to be repaid, not counting interest or fees. It goes down as the payments repay it.
Interest: Interest is what a lender charges for the use of its money, calculated on the sum owed and on the time. The cost of a financing may also include fees, which the written offer states.
Term: The term is the planned length of a financing, at the end of which the sum must be repaid or the agreement renewed. The lender sets it in its written offer.; Answer: Short term or longer term
Amortization: Amortization is the spreading of a loan’s repayment into payments over a period. That period can be longer than the term: a balance then remains owing at the end of the term.
Refinancing: Refinancing is the replacement of a financing under way by a new one, on different terms. The new lender decides and sets its terms in its written offer.; Answer: Refinancing
Bridge loan: A bridge loan is a financing of short duration that covers the wait for an expected inflow of money, such as a sale or a receivable to collect. The lender asks that this inflow be documented, and it decides.

The sales cycle

Seasonality: Seasonality is the variation of a business’s revenue with the periods of the year. A lender reads it in the statements, where strong months and slow months follow one another.; Answer: Seasonal business
Deposit (down payment): A deposit is a part of the price paid in advance, when an order is placed or a contract is signed. It is deducted from the final amount.
Purchase order: A purchase order is the document by which a customer orders goods or services, at an agreed price and on agreed terms. It announces a sale, which becomes a receivable only once invoiced.; Answer: Financing a contract

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An intermediary, not a lender.

The lender sets the final amount and its cost in its written offer.

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