LENDING

In banking, ACH stands for Automated Clearing House, which is a network that coordinates electronic payments and automated money transfers. ACH is a way to move money between banks without using paper checks, wire transfers, credit card networks, or cash.

An asset is something of value, which is owned by the borrower, that can be used as collateral on a small business loan. Lenders like banks, credit unions and CDFIs require some form of collateral to secure a business loan.

A financial statement that reports a company’s assets, liabilities and shareholders’ equity at a specific point in time

Business registration entails filling out a form and paying a fee to be officially recognized in your state, county, and/or city. Registering your business protects your business name and legitimizes your business. Secretary of State registration is generally required for MESO business loans.

The total amount of money transferred into and out of a business that is used to pay for day-to-day and long-term expenses.

This is an asset(s) pledged by the borrower to secure the loan. The lender can acquire these assets if the borrower defaults on the loan.

e practice of making on-time payments, keeping balances manageable, maintaining historical accounts, not exceeding credit limits, and checking your credit report at least once a year.

A private agency that collects and maintains data on your credit history to help lenders assess financial reliability. The top three bureaus—Equifax, Experian, and TransUnion—compile credit reports and calculate scores based on the length of credit history, amount of debt, repayment history, the number of credit inquiries, and other factors. 

A detailed record of financial history, documenting management of debt and bill payments over time. It provides a comprehensive overview of “creditworthiness” by listing personal information, open and closed accounts, payment habits, public records (like bankruptcies), and recent credit inquiries. Importantly, credit reports have been known to perpetuate systemic inequities which denied financial services to communities of color and continues to impact credit access and generational wealth today.

A number, typically ranging from 300 to 850, that predicts how likely you are to repay a loan based on your financial history. It is calculated using five key factors: payment history (35%), total debt owed (30%), length of credit history (15%), types of credit used (10%), and new credit inquiries (10%).

Also sometimes referred to as a profit and loss statement or “P&L”, this is a financial statement that shows a company’s revenues and expenses during a particular period of time. It indicates how the revenues are reduced from expenses into net income or a net loss. 

An income stream is a money a business generates on a regular basis. Some businesses may have more than one income stream. For example, a hair salon may have income from hair cuts/color as well as a separate income stream from selling hair products.

A charge for borrowed money is generally a percentage of the amount borrowed

A liability schedule is a form used to describe current debts, including their monthly payment amounts and total balances. Items that would typically be included on a liability schedule are mortgages, car loans, student loans, credit card debt, or past due balances (rent, utilities, etc).

The median is right in the middle of a group of numbers so that half of the numbers are above that amount and half of the numbers are below it. Median household income is often used to determine the median for a specific geographic area, like a county, by the number of people living in that household.

Net assets are the amount of an item of value that is owned without debt. For example, a vehicle that is worth $10,000 with a loan balance of $6,000, would be considered a net asset of $4,000.

The amount due and owing to satisfy the payoff of the underlying obligation, less interest, or other charges.

A report maintained by a business that shows the business’ income minus expenses.

Small Business Administration loans offer even longer terms and lower costs than traditional term loans, as they come partially guaranteed by the U.S. government. SBA loans are specifically designed to give small business owners the most affordable financing possible as they grow their businesses.

A loan that is repaid in regular periodic payments over a specified period of time. The “term” typically refers to the period of repayment, which can vary, being as short as several months to as long as a number of years.

“Terms” in the broader sense sometimes refer to overall characteristics of the loan, such as the length of repayment, interest rate, fees, and repayment schedule.

Tradelines are every individual credit account or loan on your credit report. Even the ones that you have paid off, have closed, or lenders have closed. “Active” tradelines are all active accounts that are currently being used or paid on. For example, current loans that are being paid or credit cards that are still open.

There are typically different types of tradelines on a credit report, such as “revolving accounts” or “installment loans”. Revolving account examples are credit cards or lines of credit, where the balance can go up and down. Installment account examples are mortgages, auto loans, student loans, and term loans where the account is paid with fixed monthly installments. 

This is the process where the lender verifies your income, assets, debt, and property details in order to determine approval/denial of a loan. It is a risk assessment.

A detailed list of what the business will use the requested loan funds for.

The percentage of available credit that you have used on an account. For example, a credit card with a $5,000 limit and a current balance of $1,000 has a utilization rate of 20% (1,000 / 5,000). The lower your utilization percentage, the better your credit score will be.