Financing Glossary
Whether you’re a business owner seeking growth capital, a real estate investor exploring DSCR loans, or a commercial borrower evaluating financing options, understanding industry terminology is essential.
This financing glossary provides clear, straightforward definitions of the most common commercial lending, real estate financing, and business funding terms used throughout the industry.
A
Accounts Receivable (A/R)
Money owed to a business by customers for products or services already delivered.
Accounts Receivable Financing
A financing solution that allows businesses to borrow against unpaid invoices to improve cash flow. Accounts receivable is commonly used as collateral in asset-based lending programs.
Amortization
The process of gradually paying off a loan through scheduled payments of principal and interest.
Asset-Based Lending (ABL)
A financing solution where a lender provides capital secured by business assets such as accounts receivable, inventory, equipment, or real estate rather than relying solely on cash flow or credit strength.
Advance Rate
The percentage of an asset’s value that a lender is willing to finance. Asset-based lending programs often provide advance rates between 60% and 90%, depending on the asset type.
B
Balloon Payment
A large lump-sum payment due at the end of a loan term.
Borrower
The individual or business receiving financing from a lender.
Bridge Loan
A short-term financing solution used to bridge the gap between immediate funding needs and long-term financing.
Business Acquisition Financing
Funding used to purchase an existing business or acquire ownership interests.
Business Line of Credit
A revolving credit facility that allows businesses to borrow, repay, and borrow again as needed.
C
Cash Flow
The movement of money into and out of a business or investment property.
Cash-Out Refinance
A refinancing transaction that allows borrowers to access a portion of their property’s equity in cash.
CMBS Loan
Commercial Mortgage-Backed Securities loans are commercial real estate loans pooled together and sold to investors.
Collateral
Assets pledged to secure a loan. Common collateral includes real estate, inventory, accounts receivable, and equipment.
Commercial Mortgage
A loan secured by commercial real estate rather than residential property.
Commercial Real Estate (CRE)
Income-producing properties used for business purposes, including office buildings, retail centers, industrial facilities, hotels, and apartment complexes.
Construction Loan
A short-term loan used to finance the construction or renovation of real estate projects.
D
Debt Service
The total amount of principal and interest payments required on a loan.
Debt Service Coverage Ratio (DSCR)
A financial metric used to evaluate whether a property’s income can support its debt obligations.
A DSCR greater than 1.0 indicates the property generates enough income to cover debt payments. DSCR loans focus primarily on property cash flow rather than personal income.
DSCR Loan
A loan program designed primarily for real estate investors that qualifies borrowers based on a property’s rental income rather than personal income documentation. Typical uses include acquisitions, refinances, and portfolio expansion.
Due Diligence
The process lenders use to evaluate a borrower, property, business, or investment before approving financing.
E
Equipment Financing
A loan or lease used to purchase business equipment, machinery, vehicles, or technology assets.
Equity
The difference between an asset’s market value and the debt owed against it.
F
Factoring
A financing arrangement where a business sells unpaid invoices to a third party in exchange for immediate cash.
FICO Score
A credit scoring model used by lenders to evaluate borrower creditworthiness.
Fixed Interest Rate
An interest rate that remains unchanged throughout the loan term.
Foreign National Loan
A financing program available to non-U.S. citizens investing in U.S. real estate.
G
Gross Rental Income
The total rental income generated by a property before expenses.
Guarantor
An individual who agrees to repay a loan if the borrower defaults.
H
Hard Money Loan
A short-term real estate loan secured primarily by the value of the property rather than borrower qualifications.
Hybrid Loan
A financing product that combines characteristics of multiple loan structures.
I
Interest Rate
The cost of borrowing money expressed as a percentage of the loan balance.
Inventory Financing
A loan secured by a company’s inventory to support working capital needs.
Investment Property
Real estate acquired primarily to generate rental income, appreciation, or investment returns.
L
Leverage
Using borrowed funds to increase investment potential.
Liquidity
The ability to quickly convert assets into cash.
Loan-to-Value Ratio (LTV)
A measurement comparing the loan amount to the property’s appraised value.
Lower LTV ratios generally represent lower risk for lenders.
M
Multifamily Property
A residential property containing multiple rental units, such as apartment buildings or duplexes.
Merchant Cash Advance (MCA)
A financing product that provides upfront capital in exchange for a percentage of future business revenue.
N
Net Operating Income (NOI)
A property’s annual income after operating expenses but before debt payments and taxes.
The formula is:
NOI=Gross Income−Operating ExpensesNOI = Gross\ Income – Operating\ Expenses
NOI is one of the primary metrics lenders use when evaluating commercial real estate loans.
O
Owner-Occupied Property
Commercial real estate where the borrower operates its own business from the property.
Origination Fee
A fee charged by lenders for processing and underwriting a loan.
P
Permanent Financing
Long-term financing that replaces short-term bridge or construction loans.
Portfolio Loan
A loan retained by the originating lender rather than sold into the secondary market.
Purchase Order Financing
Financing used to fulfill customer purchase orders before payment is received. Asset-based lending programs frequently include purchase order financing solutions.
R
Refinance
Replacing an existing loan with a new loan, often to obtain better terms or access equity.
Revolving Credit Facility
A financing arrangement that allows repeated borrowing and repayment within an approved limit.
S
SBA Loan
A business loan partially guaranteed by the U.S. Small Business Administration, often offering favorable terms for qualified borrowers.
Short-Term Rental (STR)
A property rented on a temporary basis through platforms such as vacation rental marketplaces.
Stated Income Loan
A financing program that relies on borrower-stated income rather than traditional income verification.
T
Term Loan
A loan with a fixed repayment schedule and maturity date.
Title Insurance
Insurance protecting lenders and property owners against title defects or ownership disputes.
U
Underwriting
The process lenders use to assess risk and determine whether financing should be approved.
Unsecured Business Loan
A loan that does not require specific collateral.
V
Valuation
The process of determining the market value of a property, business, or asset.
W
Working Capital
Funds used to support daily business operations, including payroll, inventory, rent, and operating expenses.
Working Capital Loan
Financing specifically designed to help businesses manage short-term operating needs and growth opportunities. Magis Funding Solutions offers working capital financing programs to support business expansion and liquidity needs.
Need Financing Guidance?
Magis Funding Solutions helps business owners and real estate investors navigate complex financing options including DSCR loans, commercial real estate financing, asset-based lending, equipment financing, bridge loans, working capital solutions, and business acquisition financing.
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