Business finance terms, explained plainly.

The words that appear in loan documents, offers and credit conversations — defined without using more jargon to explain the jargon.

Amortisation: Paying a facility down over its term so that each repayment covers part of the principal as well as the cost of finance. A fully amortising short-term loan is repaid in full by the final instalment.
Arrears: Repayments that were due and have not been paid. A facility in arrears is behind schedule, which is different from a facility that has defaulted.
AUSTRAC: The Australian Transaction Reports and Analysis Centre. Lenders that are reporting entities register with AUSTRAC and report certain transactions and suspicious matters to it.

Bank statement verification: Assessing a business by reading its bank statements directly, usually six months of PDF exports. It is how we verify revenue without connecting to your online banking.
BAS: Business Activity Statement. The return a business lodges to report GST, PAYG withholding and other obligations. Lenders read lodgement history as a signal of how well the books are run.
Business purpose: Credit applied for wholly or predominantly for a business, rather than for personal, domestic or household use. Only business-purpose lending sits outside consumer credit regulation.

Commercial credit report: A report on a business entity from a commercial bureau, covering payment defaults, court actions, insolvency notices and a risk score. Not regulated by Part IIIA of the Privacy Act.
Credit enquiry: The record a credit reporting body keeps when a lender checks your credit file. Several enquiries in a short period can lower a credit score.
Credit reporting body: An organisation that collects and holds credit information and supplies credit reports to lenders. In Australia the main ones are Equifax and Experian.

Default: A breach of the loan agreement — most often a missed repayment beyond a set period. Defaults of 60 days or more can be reported to a credit reporting body where conditions are met.
Direct debit: An arrangement authorising a lender to draw scheduled repayments from a nominated business account. The terms sit in a direct debit request service agreement.
Director guarantee: A personal promise by a director to meet the borrower’s obligations if the borrower does not. It makes the director personally liable for the facility.
Dishonour: A scheduled direct debit that is returned unpaid because the account lacked funds. Usually attracts a fee and always attracts attention on the file.

Establishment fee: A one-off fee for setting up a facility, disclosed in your offer as a dollar amount and included in the total cost of finance.

Factor rate: A fixed multiple applied once to the amount advanced, rather than a rate that accrues over time. It does not compound and it does not move, so the total repayable is set on the day you accept the offer. Because it is not an annual rate, it cannot be compared like one — compare total repayable instead.

General interest charge: The interest the ATO applies to an unpaid tax debt. It accrues while a payment plan runs, which is what makes a plan cheaper than most finance but not free.
General security agreement: A security document giving a lender an interest over a company’s assets, usually registered on the Personal Property Securities Register.
Guarantor: A person or entity that guarantees someone else’s obligations under a facility. Guarantors are assessed and identity-verified in the same way as borrowers.

Hardship: A situation where a borrower cannot meet repayments due to changed circumstances. Statutory hardship rights apply to consumer credit, not to business-purpose facilities.

Line of credit: A revolving facility you can draw on repeatedly up to a limit. Different from a term loan, which is drawn once and repaid on a schedule.

PEP screening: Checking whether an individual is a politically exposed person, as part of anti-money-laundering obligations. Being a PEP is not a problem in itself; it triggers extra due diligence.
PPSR: Personal Property Securities Register. The national register where security interests over business assets are recorded so other parties can see them.
Principal: The amount actually borrowed, before any fees or cost of finance are added.

Secured facility: A facility supported by security over assets. Security can improve pricing or size, but it also means the lender has recourse to those assets.
Servicing: Whether the business can comfortably meet the repayment out of its regular revenue. Servicing, not the value of the security, is what sizes a sensible facility.
Settlement: The point at which documents are complete and funds are advanced. Repayments are scheduled from settlement, not from approval.

Term: The length of the facility. Ours run three to six months, which is why they suit a specific purpose rather than long-term borrowing.
Total repayable: Everything you will pay across the facility — principal plus all fees and cost of finance. The single most useful number to compare between lenders.

Unsecured facility: A facility with no security taken over assets. Usually smaller, and usually priced higher, because the lender has less recourse.

Working capital: The cash a business needs to run day to day — stock, wages, rent, supplier payments — as distinct from money spent on long-term assets.