Business Credit Key Terms

Explore key terms for business credit including commercial account receivable factoring and loan guaranty

Business 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.

 

D&B Rating

The D&B rating of any business is a rate given to the company by Dun and Bradstreet. It is commonly used to assess the creditworthiness of a business. The number is similar to a personal credit score.
Try: Dun & Bradstreet provides more information about the rating, how it is calculated and the terms associated with the rating.

Commercial account receivable factoring

Commercial 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.
Try: BusinessFinance provides more information on commercial account receivable factoring including why it is beneficial and how it is obtained.

Loan guaranty, SBA loan guaranty

A 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.
Try: AllBusiness provides more information on loan guaranty and the SBA loan guaranty program.

Debt financing

Debt financing is a type of loan in which a business sells its bonds, mortgages or notes. These are short- or long-term loans.
Try: WomanOwned provides more information on debt financing.

Equity financing

Equity 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.
Try: The Small Business Administration offers additional information on equity financing.

Basic 7(a) Loan Program

The 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.
Try: SmallBusiness offers more information on the Basic 7(a) Loan Program.

Copyright © 2011 Business.com, Inc. All Rights Reserved.

---