Business Lending Glossary: Plain-English Finance Terms

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ABN: Australian Business Number, the 11-digit identifier for a business. Lenders check how long it has been active, because time trading is one of the first things a credit policy asks about. Read more.
ACN: Australian Company Number, issued by ASIC when a company is registered. A company has both an ACN and usually an ABN.
Alternative lender: Any business lender outside the major banks, including specialist cash flow lenders, private lenders and property-secured lenders. They tend to use their own credit policies rather than bank-style scorecards. Read more.
Arrears: Payments that are overdue. Lenders look at whether arrears are recent, how long they lasted and whether they have been brought up to date.
ATO payment plan: An arrangement with the Australian Taxation Office to pay a tax debt by instalments. Interest charges generally keep accruing while the plan runs. Read more.
Bank statement lending: Assessing a business loan mainly from the deposits, balances and outgoings in the business bank account rather than from tax returns.
Bankruptcy: A legal process for individuals who cannot pay their debts. After discharge, a person can borrow again, though lenders consider how long ago it ended and what has happened since. Read more.
BAS: Business Activity Statement, lodged monthly or quarterly to report and pay GST, PAYG withholding and other obligations. Lodged BAS are often used as income evidence for low doc loans.
Bridging finance: Short-term funding that covers the time between needing money and a known future payment, such as a property sale or a refinance. Read more.
Cash flow lending: Lending sized on the money flowing through a business rather than on property or assets. Most unsecured business loans are cash flow loans. Read more.
Caveat: A notice lodged on a property title that warns others someone claims an interest in the land. A caveat loan uses one as the lender's protection. Read more.
Comprehensive credit reporting: The Australian credit reporting system that records positive information, such as on-time repayments, as well as negative events like defaults. Recent good conduct can now help a file.
Court judgement: A court order that a debt be paid. Judgements appear on credit reports and public records and are a common reason for automated declines. Read more.
Credit enquiry: A record made on your credit file each time you formally apply for credit. Many enquiries in a short period can make lenders cautious. Read more.
Credit score: A number calculated by a credit reporting body summarising the information on your file. Each lender treats scores differently, and alternative lenders often look beyond them. Read more.
Debt agreement: A formal arrangement under Part IX of the Bankruptcy Act to repay creditors part of what is owed. It is recorded on credit files and the National Personal Insolvency Index. Read more.
Debt consolidation: Combining several debts into one loan, usually to simplify repayments or reduce the daily drain of multiple short-term facilities. Read more.
Default: A record that a debt of a certain size went unpaid for a set period after notice. Defaults stay on a credit file for years, even once paid, though a paid default reads better. Read more.
Director guarantee: A personal promise by a company director to repay the company's loan if the company cannot. Almost all small business loans to companies ask for one.
Director penalty notice (DPN): A notice from the ATO that can make company directors personally liable for certain unpaid company tax amounts, such as PAYG withholding and super guarantee charge. Read more.
Early repayment: Paying a loan off before the end of the term. Some facilities reduce the remaining cost; others charge a fee or require the full cost regardless. Check before signing.
Equipment finance: Funding for machinery, vehicles or equipment where the asset itself is the main security. Read more.
Equity: The value of a property or asset minus the debts secured against it. Usable equity is the part a lender will lend against. Read more.
Establishment fee: A one-off fee charged when a loan is set up. Include it when comparing offers on total cost.
Factor rate: A pricing method used by some short-term lenders where the amount repayable is the loan multiplied by a set number. It is not an annual rate, so convert it to total dollars to compare. Read more.
First mortgage: The main registered mortgage over a property, repaid first if the property is sold. Read more.
General interest charge (GIC): The interest the ATO charges on overdue tax debts. It generally accrues daily and compounds until the debt is paid.
Guarantor: A person who agrees to repay a loan if the borrower does not. A guarantor with property or a strong file can help a new business borrow.
Invoice finance: Funding against unpaid customer invoices, released before the customer pays. Includes invoice discounting and factoring. Read more.
Line of credit: A facility with a limit you can draw, repay and redraw, paying for what you use. Read more.
Loan stacking: Taking several short-term business loans at once, often from different lenders. Lenders see it as a warning sign because the combined repayments can overwhelm cash flow. Read more.
Low doc loan: A loan assessed on limited documents, usually bank statements, BAS and identification, rather than full tax returns and financial statements. Read more.
LVR: Loan-to-value ratio: total secured debt divided by the property value. For a second mortgage, the first mortgage is included. Read more.
Merchant cash advance: An advance repaid from a share of future card sales. Usually expensive; compare the total cost carefully. Read more.
Open banking: Sharing bank data securely with a lender through the Consumer Data Right or similar secure connections, instead of uploading PDF statements.
Overdraft: A bank facility allowing an account to go below zero up to a limit. Banks often cut or refuse overdrafts for businesses with tax debt or volatile income. Read more.
PAYG withholding: Tax an employer withholds from wages and pays to the ATO. Unpaid PAYG withholding is a common source of business tax debt and director penalty exposure.
Personal guarantee: See director guarantee. A promise by an individual to cover a business debt.
PPSR: Personal Property Securities Register, where lenders register security interests over business assets such as equipment, vehicles and receivables.
Private lender: A non-bank lender, often funded by investors, that lends on its own policy. Private lenders commonly secure loans against property. Read more.
Refinance: Replacing an existing loan with a new one, often to reduce cost, change terms or consolidate debts. Read more.
Revenue-based finance: Funding repaid as a percentage of revenue, so repayments rise and fall with sales. Read more.
Second mortgage: A registered mortgage behind an existing first mortgage, using the equity left above it. Read more.
Secured loan: A loan backed by an asset the lender can claim if it is not repaid, most often property. Read more.
Serviceability: Whether the business can afford the repayments from its income. Banks test it with formulas; alternative lenders often read it straight from the bank statements. Read more.
Short-term business loan: A loan repaid over months rather than years, usually for working capital or a specific opportunity. Read more.
Sole trader: An individual running a business under their own name with an ABN. Sole traders can borrow for business purposes. Read more.
Super guarantee charge: The charge a business pays when it does not pay employee super on time. It is not tax deductible and can be covered by a director penalty notice.
Term: The length of time over which a loan is repaid.
Total cost of finance: Every dollar you pay above the amount borrowed: interest, fees and charges. The best single number for comparing offers. Read more.
Trade finance: Funding to pay suppliers for stock, often imports, before the goods are sold. Read more.
Turnover: Total sales or revenue over a period. Unsecured lenders size loans largely from turnover shown in bank statements.
Unsecured loan: A loan with no specific asset as security, usually backed by a director guarantee and sized on cash flow. Read more.
Valuation: A formal report on what a property is worth. Our property-secured loans do not need one before approval; the property is assessed from sales evidence.
Working capital: The money a business needs to run day to day: stock, wages, rent and supplier bills while waiting for customers to pay. Read more.

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Business lending glossary

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