Business Credit Key Terms
Explore key terms for business credit including commercial account receivable factoring and loan guarantyBusiness credit is often needed for start-up businesses or even existing businesses that need financing to grow and develop. There are a variety of types of loans available and they all have confusing terms associated with them. For example, some business owners may be unsure of what their D& B rating is, which could potentially affect their ability to obtain credit. Some businesses use debt financing or equity financing. Others are turning to the Small Business Administration for help through a loan guaranty.
Commercial account receivable factoringCommercial account receivable factoring is the process of using a business' accounts receivable as a source of immediate cash. Third party providers offer these loans secured by the company's incoming receivables, allowing the business to have immediate access to cash.
Loan guaranty, SBA loan guarantyA loan guaranty is a promise to repay a loan. An SBA loan guaranty is a promise made by the U.S. Small Business Administration to back up the loans of those small businesses it works with. The government guaranties a percentage of the borrowed funds, which reduces the rights associated with lending to the businesses.
Debt financingDebt financing is a type of loan in which a business sells its bonds, mortgages or notes. These are short- or long-term loans.
Equity financingEquity financing is a type of loan given to a business by investors who may be willing to take on more risk, such as venture capitalists. It is a type of loan that gives the investor a stake in the business.
Small Business Administration offers additional information on equity financing.
Basic 7(a) Loan ProgramThe Basic 7(a) Loan Program is a guaranty offered through the U.S. Small Business Administration. It is one way that many existing and start-up businesses may obtain financing when they otherwise would be unable to do so.
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