Business funding glossary

These terms come up when a funder buys part of your future sales. That is a different product from a loan, so it uses different words. Read how an MCA works for the full picture.

• Merchant cash advance (MCA): a purchase of future receivables. The funder pays you a lump sum now and collects a fixed total by a split of sales or a fixed debit, subject to reconciliation. It is not a loan. Merchant cash advances
• Sales-based financing: the legal name several state disclosure laws use for an MCA and similar products, where payments rise and fall with sales. New York defines it in its Financial Services Law [4]. State disclosure laws
• Factor rate: the number you multiply the advance by to get the total you pay back. Typical factor rates run 1.1 to 1.5 [1]. At 1.4, a $50,000 advance means $70,000 paid back, or $20,000 in cost [1]. A factor rate is not an interest rate and is not an APR. MCA calculator
• Payback amount (purchased amount): the total the funder collects, the advance times the factor rate. This is the dollar figure to compare against other offers. How an MCA works
• Holdback (split, or retrieval percentage): the share of each day's card sales the funder takes. It typically runs 5% to 20% [1]. A true split goes up and down with sales. Merchant cash advances
• Fixed debit: a set amount pulled from your bank account every business day or every week, whatever your sales were. Many advances are collected this way instead of a true split. How an MCA works
• Reconciliation: the process to reset a fixed debit so it matches the agreed share of your actual sales when sales drop. Look for a written, mandatory process with a deadline. How an MCA works
• Stacking: taking a second advance while the first is still being collected. Both debits come out of the same sales. Many contracts forbid it. MCA stacking
• Early payoff discount: a lower payoff if you pay the balance early. Many contracts do not cut the cost at all, so check before you count on it. Paying off an MCA early
• Renewal: a new advance from the same funder that pays off what you still owe on the old one. You pay the new factor rate on money that partly goes straight back to the funder. MCA early payoff

These words describe the price. When two offers state their price differently, put both in dollars and as an APR with the box above.

• APR (annual percentage rate): the yearly cost of financing including interest and fees, such as origination and closing costs [3]. It is the one number that lets you compare products priced in different ways. Offer comparer
• Estimated APR: an APR worked out from projected payments, used for products like an MCA where the payback time depends on sales. Some states require it on offers; New York's rule even says other metrics may not be called a rate unless they are the interest rate or the APR [4]. State disclosure laws
• Interest rate: the yearly price of the money borrowed, without fees. It is usually lower than the APR on the same loan. Term loans
• Simple interest: interest stated as a flat percent of the amount, no matter how fast you repay. A short term makes the real APR much higher than the number shown. Offer comparer
• Origination fee: an upfront fee for processing a new loan [3]. It is often taken out of the money before it reaches you. Term loans
• Prepaid finance charge: New York's term for any finance charge paid before or at signing, or withheld from the proceeds at any time [4]. In plain words, fees you pay up front, including ones taken from your funding. State disclosure laws
• Net funding (amount received): the dollars that actually land in your account after fees are taken out. Always compare cost against this number, not the headline amount. How an MCA works
• Total repayment: everything you pay back over the life of the deal, principal plus all charges. Loan payment calculator
• Prepayment penalty: a fee for paying a loan off early. On SBA 7(a) loans of 15 years or longer, prepaying 25% or more in the first three years costs 5%, 3% or 1% of the prepayment in years one, two and three [7]. SBA loans
• Prime rate: the base rate many banks use to price business loans. The Federal Reserve's H.15 release showed the bank prime loan rate at 7.00% on its Oct 20, 2026 release [9]. SBA loans
• Fixed vs variable rate: a fixed rate stays the same for the whole loan; a variable rate moves with a base rate such as prime, so the payment can change. SBA loan calculator
• Amortization: paying a loan down with equal payments that cover interest and part of the balance each time. Loan payment calculator

These are the clauses that decide what happens if things go wrong. Read them before you sign, not after.

• Collateral: property that secures financing, which the lender can take if you do not pay. Equipment financing uses the equipment itself. Business loan requirements
• UCC lien (UCC-1 financing statement): a public filing that tells other lenders a funder has a claim on your business property. Under the Uniform Commercial Code it needs the debtor's name, the secured party's name and the collateral covered [5]. Article 9 also covers sales of accounts, which is why cash advance funders file them too [6]. How an MCA works
• Blanket lien: a UCC filing that covers all of a business's assets rather than one item. It can make the next lender hesitate. Line of credit requirements
• UCC termination statement: the filing that ends a UCC lien once you have paid. Outside consumer goods, the secured party must send you one or file it within 20 days after it receives an authenticated demand from you, once the conditions in the law are met [8]. Filings that cover sold accounts, which is how many cash advances are written, are a listed exception with their own test, so ask the funder in writing what it will file and when. Paying off an MCA early
• Personal guarantee: your promise to pay the business's debt from your own assets if the business cannot. For SBA loans, holders of at least 20% of the business generally must guarantee the loan [10]. Business loan requirements
• Confession of judgment: a signed clause that lets a funder get a court judgment against you without a lawsuit if it says you defaulted. NerdWallet's advice is that if a funder requires one, "that alone may be a reason to look elsewhere" [2]. New Jersey MCA law
• Default: breaking the contract's terms, such as missing payments, stacking where it is banned, or switching bank accounts. The contract lists what counts. How an MCA works
• Recourse and non-recourse: in factoring, recourse means you owe the money back if your customer never pays; non-recourse means the factor takes that loss and usually charges more [11]. Invoice factoring
• Commercial financing disclosure law: a state law that makes funders show cost in a standard format before you sign. State disclosure laws

These are general definitions, not legal advice, as of Oct 20, 2026.

• Term loan: a lump sum repaid on a fixed schedule. Term loans
• Line of credit: a limit you can draw from, repay and draw again, paying only for what you use. Lines of credit
• Draw: taking money from a line of credit. Line of credit calculator
• Revolving: credit that refills as you repay, like a line of credit. Lines of credit
• SBA 7(a) loan: a bank loan partly guaranteed by the U.S. Small Business Administration, up to $5 million. SBA loans
• SBA Express: a 7(a) track where the lender uses its own process in exchange for a lower guaranty; loans go up to $500,000, and SBA guarantees 50% [7]. SBA loans
• SBA guaranty: the share of the loan the SBA promises to repay the lender. For most 7(a) loans it is up to 85% on $150,000 or less and up to 75% above that [7]. It protects the lender, not you; you still owe the full amount. SBA loans
• SBA guarantee fee: a fee on SBA loans that typically runs 0.25% to 3.75%, based on loan size [3]. SBA loan calculator
• Equipment financing: financing to buy equipment, secured by that equipment. Rates run roughly 4% to 45% APR [12]. Equipment financing
• Soft costs: delivery, installation and similar costs around an equipment purchase. Some lenders finance them on top of the price [12]. Equipment financing
• Invoice factoring: selling unpaid invoices to a factor for cash now. Factors often charge 1% to 5% of the invoice value per month [11]. Invoice factoring calculator
• Revenue-based financing: repaid as a share of monthly revenue, so payments rise and fall with sales. Revenue-based financing
• Working capital: the cash a business uses to run day to day, such as payroll, rent and inventory. Working capital calculator
• Soft credit pull and hard credit pull: a soft pull checks your credit without affecting your score; a hard pull is a full application check that can. No credit check business loans

These terms show up on a merchant statement. Our statement guide walks through a real one line by line.

• Interchange: the fee the card-issuing bank charges on each card sale. It is the largest part of most processing costs and is set by the card networks. Card processing
• Debit interchange cap: for large banks, federal Regulation II limits debit interchange to 21 cents plus 5 basis points of the sale [13]. On a $100 sale that is 26 cents. Credit card processing fees
• Assessment (network fee): a small fee the card network, such as Visa or Mastercard, charges on card volume. Reading a merchant statement
• Processor markup: what your processor adds on top of interchange and network fees. It is the only part you can really negotiate. Interchange-plus vs flat rate
• Interchange-plus pricing: you pay interchange at cost plus a stated markup, shown separately. Interchange-plus vs flat rate
• Flat-rate pricing: one percent plus a fixed fee for every card, whatever it costs the processor. Simple, but you cannot see the markup. Interchange-plus vs flat rate
• Effective rate: total processing fees divided by total card sales for the month. The single best number for comparing processors. Fee analyzer
• Surcharge: an added fee on customers who pay by credit card. In New Jersey it may not exceed your actual cost to process the card [14]. Surcharge laws by state
• Cash discount: a price program that shows a card price and a lower cash price. Rules differ from surcharges. Surcharge laws by state
• Chargeback: a card sale reversed by the customer's bank after a dispute, usually with a fee to you. Reading a merchant statement
• PCI compliance: the card industry's data security standard for any business that takes cards. Look for any fee tied to it on your statement and ask what it pays for. Reading a merchant statement

1. Find the net funding: the dollars that will reach your account after every fee.
2. Find the total repayment, or for an advance, the payback amount.
3. Find the time: the term, or for an advance, how long payback is likely to take at your sales.
4. Put those three into the box at the top of this page to get dollars of cost and an estimated APR.
5. Read three clauses before you sign: personal guarantee, confession of judgment and what counts as default.

If you want options to compare, the quiz shows the products that fit your business with cost ranges before you share contact details. A request for offers goes only to Batch Capital, our own funding service.