Business Finance Glossary
Plain-English definitions of 54+ key UK business finance terms. From APR and LTV to hire purchase and invoice factoring.
Adverse Credit
A credit history that includes missed payments, defaults, CCJs, or other negative markers.
Full definitionAnnual Investment Allowance (AIA)
A UK tax relief allowing businesses to deduct the full cost of qualifying assets from taxable profits in the year of purchase.
Full definitionAPR (Annual Percentage Rate)
The total annual cost of borrowing, expressed as a percentage, including interest and mandatory fees.
Full definitionArrangement Fee
A fee charged by a lender or broker for setting up a finance facility, typically 1-3% of the loan amount.
Full definitionAsset Refinance
Releasing cash from equipment or assets your business already owns by selling them to a lender and leasing them back.
Full definitionBalloon Payment
A large lump-sum payment due at the end of a hire purchase or loan agreement, above the normal monthly instalment amount.
Full definitionBank of England Base Rate
The interest rate set by the Bank of England's Monetary Policy Committee, which influences the cost of borrowing across the UK economy.
Full definitionBridging Loan
A short-term loan secured against property, used to bridge a financial gap until longer-term finance or a property sale completes.
Full definitionCapital Allowance
A UK tax deduction that allows businesses to write off the cost of capital assets against taxable profits.
Full definitionCCJ (County Court Judgement)
A court order issued in England and Wales requiring a person or business to repay a debt.
Full definitionCharge (Legal Charge)
A legal claim registered against an asset or property as security for a debt, giving the lender rights to the asset if the borrower defaults.
Full definitionClosed Bridge
A bridging loan with a clearly defined and confirmed exit date, typically where contracts have exchanged on a property sale.
Full definitionCovenant
A condition attached to a loan agreement requiring the borrower to maintain certain financial ratios or operational standards.
Full definitionCredit Score
A numerical representation of a person or business's creditworthiness, used by lenders to assess lending risk.
Full definitionDebenture
A legal document creating a fixed and floating charge over a company's assets as security for a lender.
Full definitionDefault
A failure to meet the repayment obligations of a loan or credit agreement, typically after a defined number of missed payments.
Full definitionDevelopment Finance
A structured, staged lending facility used to fund property development projects, based on the gross development value (GDV) of the completed scheme.
Full definitionDrawdown
The act of accessing funds from an agreed credit facility, either in a lump sum or in staged amounts.
Full definitionEBITDA
Earnings Before Interest, Taxes, Depreciation and Amortisation - a measure of a business's core operating profitability.
Full definitionExit Fee
A fee charged by a lender when a loan is repaid early or at the end of the agreed term.
Full definitionExit Strategy
A defined plan for repaying a short-term finance facility, required by lenders for bridging loans and development finance.
Full definitionFacility
An agreed credit arrangement between a lender and borrower, defining the maximum amount available, conditions, and repayment terms.
Full definitionFactor Rate
A pricing mechanism used by merchant cash advance providers, expressing the total repayment as a multiple of the amount advanced.
Full definitionFCA (Financial Conduct Authority)
The UK regulator responsible for financial services firms, including credit brokers and lenders.
Full definitionFinance Lease
An asset finance structure where the business uses an asset for most of its useful life while the lender retains legal ownership.
Full definitionFirst Charge
The primary security interest over a property, giving the first charge holder priority in recovering their debt in the event of a sale.
Full definitionFlat Rate
An interest calculation method where interest is charged on the original loan amount throughout the term, rather than on the declining balance.
Full definitionFRN (Firm Reference Number)
A unique identifier assigned by the FCA to every authorised financial services firm in the UK.
Full definitionGDV (Gross Development Value)
The estimated total value of a property development project once all units are completed and sold or let.
Full definitionGrowth Guarantee Scheme
A UK government-backed lending scheme providing partial guarantees to lenders, enabling them to lend to businesses that may not meet standard criteria.
Full definitionHard Credit Search
A full credit check that leaves a visible footprint on a credit file, potentially affecting the credit score.
Full definitionHire Purchase (HP)
An asset finance arrangement where a business hires an asset and eventually owns it outright after making all agreed payments.
Full definitionHoldback Rate
The fixed percentage of daily card sales retained by a merchant cash advance provider as repayment.
Full definitionInterest Cover Ratio
A measure of how easily a business can pay its interest obligations from its operating profit.
Full definitionInvoice Discounting
A confidential form of invoice finance where businesses borrow against their sales ledger while retaining control of credit management.
Full definitionInvoice Factoring
A form of invoice finance where the lender purchases invoices, advances cash, and manages credit control on the business's behalf.
Full definitionLetter of Credit
A bank-backed payment guarantee used in international trade, ensuring the seller receives payment provided they meet the agreed terms.
Full definitionLTGDV (Loan to Gross Development Value)
The ratio of total development finance to the projected completed value of a development project.
Full definitionLTV (Loan to Value)
The ratio of a loan amount to the value of the asset used as security, expressed as a percentage.
Full definitionOpen Bridge
A bridging loan without a fixed repayment date, used when the exit route is planned but not yet contractually confirmed.
Full definitionOperating Lease
A short-term asset rental agreement where the lender retains a meaningful residual value in the asset, resulting in lower monthly payments than a finance lease.
Full definitionPersonal Guarantee (PG)
A commitment by a company director to repay a business debt from their personal assets if the company cannot.
Full definitionPurchase Order Finance
Finance provided against a confirmed purchase order, enabling businesses to fund the production or procurement of goods before customer payment.
Full definitionRedemption
The full repayment of an outstanding loan balance, discharging the borrower from the debt and releasing any security.
Full definitionRevolving Credit Facility (RCF)
A flexible credit facility allowing a business to draw down, repay, and re-borrow up to an agreed limit on a rolling basis.
Full definitionSale and Leaseback
A transaction where a business sells an asset it owns to a finance provider and immediately leases it back, releasing equity while retaining use.
Full definitionSecond Charge
A security interest over a property that is subordinate to an existing first charge (typically a mortgage).
Full definitionSME (Small and Medium Enterprise)
A business classification for small and medium enterprises, defined by employee count and turnover thresholds.
Full definitionSoft Credit Search
A background credit check that does not leave a footprint on the credit file and does not affect the credit score.
Full definitionSupply Chain Finance
A financing solution that allows buyers to extend payment terms to suppliers while the supplier receives early payment from a finance provider.
Full definitionTerm Loan
A business loan for a fixed amount, repaid in regular instalments over a defined period with an agreed interest rate.
Full definitionTrade Finance
A broad category of financial instruments used to facilitate international trade by managing payment risk and funding supply chains.
Full definition