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.

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.

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.

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.

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.
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.