Small Business Loan Terms

 

   
Annual Percentage Rate (APR)
 
The actual amount of the loan—including all annual interest and any other fees associated with the loan.
Interest Rate
 
A rate given by the lender attached to the total amount of the loan. It is determined by how long it will take to repay the loan.
Line of credit
 
Also referred to as the LOC, it is how much money a lender is willing to loan to your business
Collateral
 
Something you promise to the lender as a full repayment of the loan in the case you cannot repay the loan. This usually is something of high value, such as a retirement fund, or your house.
Repayment penalties
 
Some lenders can charge anywhere from 2% to 5% penalty if you decide to pay the loan earlier than expected.
Term
 
The length of time given to repay the loan.
Unsecured loan
 
This is a type of loan where the lender does not require any type of collateral. This happens when a business has a high credit score and a great financial history. 
Secured Loan
 
Type of loan that requires collateral to attain the capital.
Working Capital
 
The available amount of capital you have to pay off your current debts.
Character
 
The term used to describe the lender's opinion of the borrower's competency in regards to running a business and managing the assets of the loan payments
Equity
How much your company is worth after factoring any debt it may owe.
FICO score
The part of your credit report lenders look at most. Standing for Fair Isaac Corporation (named after the creators of this score), the FICO score ranges from 300-850. A score of 650 or above is considered a good score.

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