Glossary / Business

Loan Glossary

Accounts Receivable Financing: A loan gained by borrowing against receivables. Loans are paid down as receivables are collected.
Adjustable Rate Loan (ARL): A loan with an interest rate that changes during the term of the loan. The payments generally increa
Adjustable Rate Mortgage (ARM): A loan with an interest rate that changes during the term of the loan. The payments generally increa
Amortize: Payoff off a debt in installments which includes both principal and interest.
Amount Financed: A required Truth in Lending Act disclosure for consumer loans. It is calculated by starting with the
Annual Fee: The amount charged by the lender each year to cover the administrative costs of the loan.
Annual Percentage Rate (APR): A required Truth in Lending Act disclosure for consumer loans. It is a calculation of the cost of cr
Application Fee: A fee charged by the lender or broker for the loan application.
Appraiser: A person typically hired by a lender to provide an appraisal.
Arbitration: A privately conducted trial to resolve a dispute. Arbitration can be binding (in which case there is
Assets: Anything of value. Any interest in real or personal property which can be appropriated for the payme
Bad Debt: A debt that is not collectible and is therefore worthless to the creditor.
Balance Sheet: Financial statement presenting measures of the assets, liabilities and owner's equity or net worth o
Balloon Payment: A scheduled payment due at the end of a loan term that is substantially greater than the regular mon
Borrower: A person who receives funds in the form of a loan with the obligation to repay the loan in full.
Bridge Loan: Short-term loan to provide temporary financing until more permanent financing is available.
Broker Agreement: A contract between a borrower and a mortgage broker. It describes what the broker will do for the bo
Broker Compensation Or Fee: The amount of money the broker will receive for finding a loan for a borrower. This may be an amount
Business Credit Card: An amount of money, which a business can borrow against at times it needs capital. Using a card acce
Business Plan: A document that describes an organization's current status and plans for several years into the futu
Capital: Broadly, all the money and other property of a corporation or other enterprise used in transacting i
Capital Markets: Those financial markets, including institutions and individuals, that exchange securities, especiall
Capitalization: Long-term debt, preferred stock and net worth. The loan capital of a community development loan fund
Cash Flow Financing: Short-term loan providing additional cash to cover cash shortfalls in anticipation of revenue, such
Cash-Out Refinancing Loan: A loan that refinances a prior mortgage and that provides additional cash to the borrower. Funds.
Closing Costs: A general term to describe the fees that a borrower will pay at closing. Sometimes called 'settlemen
Collateral: Assets pledged to secure the repayment of a loan.
Commercial Real Estate Loans: Similar to residential mortgages, but collateral is business property. Interest rates are usually fi
Commercial Term Loans: Loans made to businesses that can be either secured and unsecured. Usually made to mid-size and larg
Conforming Loans: Loans which conform to Fannie Mae guidelines.
Courier Fee: This is a fee that may be charged to send documents or payments by courier, messenger or overnight m
Covenant: An agreement or promise to do or not to do a particular thing; to enter into a formal agreement; a p
Credit Rating: A predictor of the ability to pay back a loan. The credit rating is a result of credit scoring
Credit Report: This is a report which is generated by a credit reporting agency (such as Trans Union, Experion or E
Credit Score: This is a number that is supposed to show the lender how likely you are to repay a loan--whether you
Credit Scoring: The evaluation system used by lending institutions to determine relative credit riskiness of a busin
Creditfyi: A web site for checking business credit reports
Current Asset: Assets that will normally be turned into cash within a year.
Current Liability: Liability that will normally be repaid within a year.
Current Ratio: Current assets divided by current liabilities -- a measure of liquidity. Generally, the higher the r
Debt: An amount owed for funds borrowed. The debt may be owed to an organization's own reserves, individua
Debt Financing: A loan with pre-agreed terms, including payback schedule and interest.
Debt Service: Amount of payment due regularly to meet a debt agreement; usually a monthly, quarterly or annual obl
Debt Service Reserve: Term used to refer to cash reserves set aside by a borrower, either by internal policy or lender cov
Deed Of Trust: In some states loans are secured by means of a document called a deed of trust, instead of a mortgag
Default: A failure to discharge a duty. The term is most often used to describe the occurrence of an event th
Delinquent: In a monetary context, something that has been made payable and is overdue and unpaid,
Document Preparation Fee: An amount of money that you may be charged for the preparation of mortgage loan documents. This char
Due Diligence: Refers to the task of carefully confirming all critical assumptions and facts presented by a borrowe
Dun and Bradstreet: Leading provider of business credit information.
Endowment Or Trust: A fund that contains assets whose use is restricted only to the income earned by these assets.
Equifax: One of three leading providers of personal credit information.
Equipment Leases: Leases allowing companies to purchase new equipment.
Equity: This is the dollar amount of your home that you really own. You can calculate your equity by taking
Equity Participation: An ownership position in an organization or venture taken through an investment. Returns on the inve
Experian: One of three leading providers of personal and business credit information.
Fees: This is money you pay or is charged to you up front to get a mortgage loan. You may pay fees in cash
Fico: Credit scores calculated by Fair Isaac Company are often referred to as FICO Normally an average of
Finance Charge: The finance charge is a disclosure that appears on the Truth in Lending Act Disclosure Statement. It
Finance Companies: These are companies that make loans which are generally at higher rates than are available from bank
Fixed Interest Rate: An interest rate that is the same throughout the life of a loan.
Fixed Rate Loan: A loan where the interest rate does not change during the term of the loan.
Flood Certification Fee: A fee charged to determine if the property lies in a flood zone and whether flood insurance is requi
Foreclosure: The legal procedure by which a lender holding a mortgage on your house forces a sale of your house t
Fully Amortizing: This describes a loan where the balance owed at the scheduled end of the loan is zero if all regular
Fund Balance: Net worth in a nonprofit organization; total assets minus total liabilities.
General Recourse: Rights to demand payment from the general assets of the debtor, without seniority in access to any s
Good Faith Estimate: This document lists the estimated fees you will have to pay to get the loan. It also identifies who
Government Recording Fees And Taxes: Fees and taxes required to be paid to the local government where your mortgage documents are filed.
Guaranteed Loan: A pledge to cover the payment of debt or to perform some obligation if the person liable fails to pe
Home Equity Loan: A loan made to a current homeowner that is secured by the equity in the home.
Homeowners Hazard Insurance: Homeowner's or Hazard Insurance is insurance required to protect the mortgage lender against possibl
Hud: The U.S. Department of Housing and Urban Development
Hud Special Information Booklet: This is a booklet published by HUD that describes important terms and provides information about the
Hud-1: Also called a 'Settlement Statement' of all costs and fees in your closing.
Indorsement: 1. The act of signing one's name on the back of a check or a note, with or without further qualifica
Installment Note: A note which provides that payments of a certain sum or amount be paid in more than one payment on t
Installment Sale: Also known as an agreement of sale or a land contract. This is a method of reporting capital gains b
Institutional Lender: A lender which makes a substantial number of real estate loans, such as banks, savings and loan asso
Interest Rate: The amount charged by a lender for the money borrowed. It can be fixed or variable.
Interim Financing: Short-term loan to provide temporary financing until more permanent financing is available.
Intermediaries: Non- or for-profit institutions that have specialized lending capacities. They obtain capital in the
Introductory Rate: Some loans have a lower introductory interest rate, which is in effect for a limited time. At the en
Inventory Financing: Money borrowed on the basis of finished inventory. The loan is paid as inventory is sold.
Jumbo Loans: Loans which exceed the Fannie Mae guidelines for loan size and amount. Jumbo loans may have differen
Late Charge: A penalty you will have to pay if you do not make your loan payment on time. This usually is calcula
Lender: A company or person that makes mortgage loans, such as a mortgage banker, credit union, bank, or sav
Lender Paid Compensation To Broker: This is also called the Yield Spread Premium. Fee which the lender pays to the mortgage broker for o
Leverage: Using long-term debt to secure funds for an organization. In the social investment world, often refe
Lien: A claim (legal interest) against a home. Common types of liens include a mortgage, tax lien or judgm
Limited Liability: Limitation of shareholders' losses to the amount invested.
Limited Recourse: Rights only to specifically stipulated assets to satisfy an unpaid debt.
Line Of Credit: Also called an 'open line of credit' secured on your home. Often there are no closing costs involved
Linked Deposit: A deposit in an account with a financial institution to induce that institution's support for one or
Loan Agreement: A written contract between a lender and a borrower that sets out the rights and obligations of each
Loan Approval-Commitment: A lender's agreement to make a loan on particular terms, including interest rate, fees and charges.
Loan Consolidation: The combining of a number of loans into a single new loan. Consolidation typically extends your repa
Loan Term: Length of time until your loan is due and payable.
Long Term Debt: Financing used to purchase or improve assets such as plant, facilities, large equipment and real est
Loss Reserves: That portion of a fund's earnings or permanent capital designated by the board of directors as a res
Market Rate: The rate of interest a company must pay to borrow funds currently. Program-related investments gener
Maturity: A loan's maturity is the life of the loan; that is, how long you have to repay the loan. It usually
Mediation: A process of dispute resolution in which an impartial third party, a mediator, intervenes in a dispu
Mortgage: A mortgage is a promise in which you agree to put up your home as security for a loan. The mortgage
Mortgage Banker: A lender, other than a bank, credit union, or savings and loan, that specializes in making residenti
Mortgage Broker: A person or company that obtains a mortgage loan for the borrower from another lender. A mortgage br
Mortgage Insurance (PMI Or MI): Insurance that may be required when a loan is greater than 80% of the value of the home. This insura
Multi-Lender Environment: Numerous lending institution sharing the same site and information to provide instant financing to s
Negative Covenants: Statements of actions or events of the borrower must prevent from occurring or existing, for example
Net Working Capital: Current assets minus current liabilities.
Net Worth: Total assets minus total liabilities. Aggregate net value of the organization.
Notice Of Right To Cancel: Under federal law, you may be permitted to cancel or 'rescind' a mortgage loan within a specified ti
Open-End Loan: A loan that permits the borrower to draw money from time to time up to a credit limit. A home equity
Opportunity Cost: The potential benefit that is foregone from not following the best (financially optimal) alternative
Payment Schedule: This information on the Truth in Lending Disclosure Statement shows the amount of the first loan pay
Personal Guarantee: A guarantee that the primary owner will assume personal responsibility for repayment of the loan, sh
Points: A fee charged by the lender as additional compensation for making the loan. One 'point' is equal to
Portfolio: A combination of assets held for its investment benefits, including financial and non-financial retu
Prepayment Penalty: The charge which can be imposed if you pay off your loan before maturity. The Truth in Lending Discl
Prime Loan: A loan offered to borrowers with better credit history (sometimes called 'A' loans). Prime loans gen
Prime Rate: The rate a lender charges its best customers. The rate is calculated differently by each lender.
Principal: In commercial law, the principal is the amount that is received, in the case of a loan, or the amoun
Private Mortgage Insurance: Private Mortgage Insurance (PMI or MI)- Insurance required to be paid for by the borrower to protect
Processing Fee: A fee charged by lenders or brokers to prepare a complete loan application file. A processing fee ma
Program-Related Enterprise: A business or enterprise designed to promote the social purpose goals of an organization as well as
Program-Related Investment: Broad, functional definition: A method of providing support to an organization, consistent with prog
Promissory Note: Promise to pay. Written contract between a borrower and a lender that is signed by the borrower and
Promissory Note: A legal contract in which the borrower promises to pay back the loan. The 'promissory note' sets for
Purchase Money Loan: A loan for the purpose of purchasing a home.
Rate Lock: Refers to the agreement between the borrower and the lender or broker that as long as the loan is cl
Receivables: Accounts receivable; an amount that is owed the business, usually by one of its customers as a resul
Recording Fees: Fees charged by the local government to record loan documents (for example, the mortgage). These fee
Recourse: Refers to the right, in an agreement, to demand payment from the person who is taking on an obligati
Recoverable Grants: Funds provided by a philanthropist to fulfill a role similar to equity. A recoverable grant may incl
Refinance: To repay one or more existing mortgage loans by getting a new mortgage loan.
Rescind: Literally means 'to take back' or 'cancel.' If a borrower rescinds a mortgage loan, it is as if the
Restructure: A revision of a financial agreement that alters the conditions or covenants of the original agreemen
Revolving Credit: It is the same thing as a line of credit: an amount of money, which a business can borrow against at
Right Of Rescission: Literally means 'to take back' or 'cancel.' If a borrower rescinds a mortgage loan, it is as if the
Roll Over: Prior to or at the time of the maturity of an investment or loan, the interested parties agree to co
Sba Loan: Loans to small businesses unable to secure financing on reasonable terms through normal lending chan
Secondary Mortgage Loan: A mortgage loan that is in addition to a mortgage that already exists on the home.
Secured Loan: A loan secured by specific collateral. Creditor may foreclose and seize the specific property that i
Security: A pledge made to secure the performance of a contract or the fulfillment of an obligation. Examples
Senior Debt: Debt that must be repaid before subordinated debt receives any payment in the event of default.
Settlement: The time when loan and mortgage documents are formally signed and the loan transaction is completed.
Settlement Agent: The person who organizes and is in charge of the loan closing. The settlement agent is the person wh
Settlement Statement: A mortgage loan closing form required by HUD that is often called a HUD-1. It provides details of al
Short Term Debt: Financing used to secure cash for accounts payable and inventory.
Small Business Administration: Established by Congress, the SBA provides financial, technical and management assistance to help Ame
Sub Prime Loans: These loans are priced higher than prime loans, often much higher. Loans to borrowers whose credit i
Subordinated Debt (Junior Debt): Debt over which senior debt takes priority. In the event of bankruptcy, subordinated debt-holders re
Subsequent Draw Fee: It's a fee that the financial institution may charge each time you use the line of credit after the
Survey: A drawing or map showing the precise legal boundaries of a property and other physical features, pre
Term: The period of time during which loan payments are made. At the end of the loan term, the loan must b
Term Loan: A loan for a specific amount of money. It has either have a fixed or variable interest rate, matures
Total Liabilities: Total value of financial claims on a firm's assets. Equals total assets minus net worth.
Transfer Tax Or Charge: This is a government tax or charge that is usually based on a percentage of the property value or lo
Transunion Corporation: One of three leading providers of personal credit information.
Truth In Lending Act (TILA): This is a federal law designed to protect borrowers and to give them enough information to compariso
Truth In Lending Disclosure Statement: This is a very important document that federal law requires for all consumer loans.] It provides key
Underwriting Fee: This is a fee charged by the lender to evaluate whether the borrower qualifies for a mortgage loan.
Unsecured Loan: A loan granted upon the good credit of the borrower. No collateral involved.
Up Front Costs: These are costs or fees which are charged to the borrower at or before closing of the mortgage loan,
User: A non- or for-profit entity that receives a program-related investment directly from a funder for us
Variable Interest Rate: An interest rate that changes during the life of a loan.
Warranties: Statement attesting that certain statements are true. For instance, the borrower may warrant that it
Working Capital: Technically, means current assets and current liabilities. The term is commonly used a synonymous wi
Write Off: When an investment, such as a loan, becomes seriously delinquent or in default and is determined to
Yield Spread Premium (YSP): This is a payment made by a lender to a mortgage broker in connection with a borrower's mortgage tra

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