Glossary of Business Credit Terms

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2/10 Net 30

A type of trade credit term where the business owners can decide to have a 2 percent discount if the payment to vendor is made within 10 days or pay the full amount in 30 days.

2/15 Net 40 ROG

A type of trade credit term where the business owners can decide to have a 2 percent discount if the payment to vendor is made within 15 days or pay the full amount in 40 days.

3/7 EOM (End of Month)

A type of trade credit term where the business owners can decide to have a 3 percent discount if the payment to vendor is made within 7 days of the following month in full instead of the seventh day of the second month.

A

Accounts Payable - AP

Money owed by a company for goods and services purchased on credit to its vendors or suppliers.

Accounts Receivable - AR

Money owed to a company for goods and services purchased on credit. These accounts are sometimes called trade receivables.

Appeal Bond

A type of court bond taken out by a defendant seeking to appeal a ruling that has been made by a judge in a higher court.

Asset-Based Financing

A common method of debt finance that allows businesses to borrow funds against their corporate assets such as real estate, inventory, receivables and equipment. As long as these assets have value, ABF is more flexible than traditional bank financing.

Auto Dealer Bond

A bond obtained by vehicle dealers that ensures that they will comply with the industry rules and regulations of vehicle dealership in whatever state they find themselves.

B

Bank Term Loan

Loans a bank issues with a long term repayment plan.

Bid Bond

A surety bond required by the contractors before they can bid on projects . It works as a guarantee that the awardee of the bid will honor the terms of the bid.

Bridge Financing

A temporary loan that is intended to cover the short term expenses of business until the business secures long-term financing.

Business Credit Card

A card specifically designed to finance your business related expenditures not your own

Business Line of Credit

A loan allows you to borrow a sum of money at once against a predetermined limit with the condition that you will pay back the entire amount borrowed, with interest, over a fixed period of time.

Business Services Bond

A surety bond that is meant to cover business in the event that involves an employee theft.

Business Term Loan

Funds borrowed by companies for business purposes such as working capital, equipment or real estate and have regular repayments at a fixed or variable interest rate.

C

Cash Discount

A price reduction given by a service provider or the seller of goods in a bid to encourage the customer to pay for purchased products within a period.

Collection Filing

The process that collection agency uses to report your inability to pay off bills to the relevant credit bureau, which in turn can significantly affect your overall credit score.

Commercial Letter of Credit

A document used to substitute the bank’s credit for the customer’s with the aim of facilitating trade. This letter is taken as the primary payment tool for a transaction.

Commercial Real Estate Loan

A type of mortgage loan acquired by someone on a commercial property. The commercial property can be any real estate that produces income and is used for business purposes alone.

Commercial Surety Bond

Bonds that are mandated by government agencies to provide protection to public interests.

Contract Surety Bond

A bond that guarantees fulfillment of contracts and confirms that contractor will perform all duties defined in a construction contract.

Corporate Credit Rating

An evaluation of a company’s creditworthiness.

Court Surety Bond

A surety bond to protect against risks and potential losses that may occur as a result of legal proceedings.

Credit History

A record regarding how do consumer or business uses their credit cards they own, amount of loans they owe, and whether they pursue on-time payments or not. Usually, all of this information is recorded in credit reports.

Credit Limit Recommendation

A suggested guideline to help businesses more easily extend trade credit to their customers given the level of acceptable risks.

Credit Risk

A risk of loss that results when a borrower defaults on the repayment of a loan or fail to meet contractual obligations.

Credit Utilization Ratio

A percentage that represents how much you owe relative to your credit limit.

D

Days Beyond Terms - DBT

Average of the number of days it takes for any business to pay its overdue bills, after the passing of the initial due date.

Dynamic Discounting

A collection of methods used in establishing payment terms between supplier and buyer in a bid to accelerate the payment of goods or a service for a certain discount or at a reduced price.

E

Employee Dishonesty Bond

A type of fidelity bond that protects the business from dishonest actions by employees like fraud, theft, embezzlement, forgery, etc.

Equipment Loan

A type of financing that enables small business owners to get money to purchase equipment when they don’t have enough cash.

ERISA Bond

A type of fidelity bond that protects the beneficiaries of an employee benefit plan.

EXIM Direct Loan

A secure and competitive financing method to provide assistance to the foreign buyers of US goods and services.

EXIM Export Credit Insurance

A policy designed to provide protection of the accounts receivable of the exporters.

EXIM Finance Lease Guarantee

Provide leasing financing to creditworthy international leases, whether private or public, of the United States goods and services if otherwise the funding is not available, or if the interest rates applicable are not economically feasible.

EXIM Loan Guarantee

EXIM Bank loan guarantees help ensure that international purchasers receive competitive financing.

EXIM Working Capital Guarantee Program - WCGP

EXIM's Working Capital Guarantee Program helps small companies to obtain the equity necessary to purchase stock or raw materials, export them on the market or engage in manufacturing.

Export Credit Agency

Entities, also known as ECA, that offer loans, guarantees and insurance to exporters who want to execute business in emerging markets rather than home country.

Export Financing

Financial assistance provided by banks and other financial bodies to businesses to sell and ship products outside a region or country.

Export-Import Bank of United States-EXIM

An official export credit agency of US, created by Congress 80 years ago to help US businesses grow internationally.

F

Fidelity Bond

An insurance policy that shields against theft or fraud.

Fiduciary Bond

A bond that protects the people whose property the fiduciaries manage against acts of theft or embezzlement.

Financial Guarantee Bond

A legal contract that guarantees that the principal will pay financial obligations owed to the obligee.

Financial Institution Blanket Bond

An insurance policy obtained by financial institutions that protects the institution against the consequences of dishonest acts perpetrated by their employees.

Franchise Loan

Loans for the purchasing of a franchise license by a franchisee from a franchisor, in return for annual licensing payments and capital.

Freight Broker Bond

A bond that protects shippers and motor carriers from fraudulent activities or failures of freight brokers. Freight broker bonds are a legal requirement for the obtainment of a brokerage authority.

G

H

Hard Money Equity Loan

Loans provided by independent lenders against collateral and are a means to get the cash flow within a short span.

I

Import Financing

The capital availed to businesses to buy goods for the purpose of being imported into the country.

Installment Credit

A type of credit repayment loan plan that comes with a fixed amount and payment period.

Installment Loan

A type of loans that allows the borrower to pay a fixed amount of money to the lender from time to time.

Insurance Score

A mathematical rating determined by a multi-variable model derived from data in a person's credit report predict the likelihood of loss claim.

Inventory Loan

A type of short-term loan granted to companies or businesses to buy products or inventories for sale.

Invoice Factoring

A financing method whereby a business sells its account receivables (unpaid invoices of customers) at a discount to a factoring company (factor).

J

Janitorial Bond

A bond is taken out by janitorial businesses to protect their clients from theft by members of their employee while on the job.

K

L

Letter of Credit

A contract from the bank guaranteeing that the other party involved in a certain transaction will pay the full amount under certain conditions and terms.

License and Permit Bonds

A type of commercial bonds that provides guarantee so the business can operate in accordance with the government laws

M

Maintenance Bond

A bond taken out by contractors that protect building owners from defects in workmanship, materials or design that could be detrimental to the project later in the future.

Mechanic’s Lien Bond

A bond that removes a mechanic’s lien from a piece of property and attaches it to the bond. It is gotten by the property owners, protects the contractors and is financed by the Surety.

Merchant Cash Advance Loan

A lump sum cash payment made by a financing company against a business’s future income such as credit card and/or debit card sales.

Microloan

A type of loan made by lenders especially for small businesses, for people who are stepping into the corporate world and for the poor citizens.

Miscellaneous Bond

Miscellaneous bonds are mostly used situations where the government or some governing authority wishes to ensure that businesses act a certain way e.g. the ethical treatment of staff, or uphold some certain conditions like in the case of bonds required for the issuance of licenses and permits.

Mortgage Broker Bond

A legally binding contract between a mortgage broker, a surety and the broker’s clients that protects the clients from certain actions of the mortgage broker that are not in line with industry standard or are purposefully to the detriment of the client.

N

Non-Recourse Factoring

A popular factoring facility, where the factoring company has to assume the risk of credits if your customers are not able to pay for their invoices because of insolvency within the factoring period.

O

Obligee

The obligee may be the government or private companies and the general public.

P

Payment Bond

A surety bond that protects the suppliers, subcontractors, and laborers in case the contractor doesn't pay them what is owed under the contract.

Payment History

A record of all timely, late, and missed payments on the credit accounts owned by the person or organization.

Performance Bond

A guarantee to a project owner that contract will be completed by contractor according to terms and conditions.

Principal

This is the party that buys the surety bond. This party can involve business owners or contractors.

Probate Bond

A legally binding contract taken out by the executor of a will or a caretaker or personal asset manager that guarantees that the will executor or asset manager will carry out the will of the deceased ethically and honestly.

Public Official Bond

A bond taken by civil servants in public offices that guarantees that the officials will adhere and comply to the rules and regulations of that office, and perform their duties faithfully.

Public Records

Information about a person or a business from any government agency that could be legally shared publicly. It includes bankruptcy, foreclosure, judgment, or a tax lien.

Purchase Order Loan

A financing tool that is specifically designed to assist resellers and distributors to fulfill their large purchase orders.

Q

R

Recourse Factoring

A financial solution for businesses in which the business tends to sell its account receivables to the factoring company, with a guarantee that it would repurchase these invoices in case of non-payment (uncollectible accounts) by the customers. With this, the factor will not have to take the risk of any bad debts.

S

SBA 7(a) Loan

A Small Business Administration (SBA) program that provides loans up to $5 million to small businesses.

SBA CDC/504 Loan

A Small Business Administration (SBA) program that provides loans to small businesses that are in need of buying equipment or real estate.

SBA Export Express Loan

A US government loan that funds participation in foreign trade shows or trade missions.

SBA Export Working Capital Loan

A type of loans structured specifically for those companies that mainly generate their revenues through exports.

SBA International Trade Loan

A type of loans for companies that produce goods in the US and export them to international markets.

SBA Loan

A commercial loan issued by banks and other lenders such as credit unions to small business owners and guaranteed by Small Business Administration (SBA).

SBA Microloan

A Small Business Administration (SBA) program that offers loans up to $50,000 for new or early stage businesses seeking funds to grow or startup costs.

Secured Loan

A financial product in which collateral is pledged by the borrower.

Short-Term Business Loan

A type of loan that provides businesses access to “quick cash” to cater to unforeseen or urgent financial situations.

Subdivision Bond

A contract that ensures that the principal will fulfill agreed-upon obligations, or reimburse the obligee a certain amount of money in damages if the principal fails to fulfill obligations of the contract.

Supply Bond

A legal contract between a supplier and a purchaser that guarantees that the supplier will deliver an agreed upon amount and type of material to the purchaser.

Surety

This is usually an insurance company, bank, or other financial institution that issues the bond and guarantees payments.

Surety Bond

A legally binding contract between three parties— the Principal, the Surety and the Obligee—that ensures that the principal will fulfill agreed-upon obligations to the obligee.

T

Trade Credit

A B2B agreement to buy goods and/or services but without paying for them on the spot when they are delivered.

Trade Discount

The price reduction manufacturers give retailers or wholesalers when those buyers purchase goods or products.

Trade Payment History

Systematic record of all the payments you make for both current and past credit accounts.

U

UCC Filing

A legal notice which lenders have to file when a borrower defaults in payment and allow lenders to lay claim to the collateral.

V

W

Warranty Bond

A bond that guarantees that a contractor or construction company will complete a project to satisfaction, adhering to building codes and standards and taking care of any warranty issues within the span of a project.

X

Y

Z

Zero Balance Trades

The total number of tradelines with zero balance.