Business lending glossary
Plain English definitions of the words business lenders and credit teams use. Each term has a short answer, a worked example and the questions lenders ask.
Lending basics
Credit analysis
Fixed charge coverage ratio
Cash left after costs against fixed payments
What is the fixed charge coverage ratio (FCCR)?
Debt service coverage ratio
Cash earned against loan payments due
What is the debt service coverage ratio (DSCR)?
Five Cs of credit
Five headings a credit team uses to judge a loan
What are the 5 Cs of credit in commercial lending?
Management accounts
Up-to-date internal financial reports
What are management accounts?
Credit memo
The lender's written case for a credit decision
What is a credit memo in lending?
Cash flow lending
Lending against earnings, not against assets
What is cash flow lending, and how does it differ from asset-based lending?
Security and documents
Debenture
Security over a company's assets
What is a debenture in business lending?
Stips (stipulations)
Documents a lender needs before it funds
What are stips in lending?
Conditions precedent
What the borrower must deliver before the first draw
What are conditions precedent in a loan agreement?
Personal guarantee
An owner's promise to repay if the company cannot
What is a personal guarantee on a business loan?
Property and bridging
Asset finance
Residual value
What an asset is expected to be worth at the end of the term
What is residual value in asset finance and leasing?
Hire purchase vs lease
Who owns the asset at the end
What is the difference between hire purchase and a lease?
Asset finance
Funding secured on the asset it buys
What is asset finance?
Invoice finance
Alternative finance
Compliance
AI and compliance
AI intake agent
Software that completes the file before credit review
What is an AI intake agent for lenders?
Financial AI agent
An AI that does a finance task with tools
What is a financial AI agent?
Human in the loop
A person reviews and can change the result
What does human in the loop mean in credit decisions?
Working a file? Try the DSCR calculator or the business loan document checklist, or read the lender guides.