Business finance jargon, decoded

Why the language matters

A finance offer is a contract, and contracts use precise words. The trouble is that the precise word is rarely the everyday one, so a perfectly ordinary arrangement can read like a foreign language. Knowing what each term actually means lets you compare offers properly, spot the parts that cost you money, and ask sharper questions before you sign. This guide walks the terms in the order you tend to meet them — the cost, the structure, the security and the small print — and links each to its full entry in the glossary.

The cost words

The headline figure is usually the APR — the yearly cost of borrowing including interest and mandatory fees, which is the fairest single number for comparing offers. Beneath it sits the principal, the amount actually borrowed, and the interest charged on it, which may be a fixed rate or a variable rate priced over the base rate. Watch too for the difference between simple interest and annuity repayments, where each instalment mixes interest and principal. To strip a quote back to its true cost, run it through the true cost of borrowing calculator.

The structure words

How the money is delivered and repaid has its own vocabulary. A term loan advances a lump sum repaid over a set period; a revolving facility gives you a credit limit to draw, repay and reuse. The maturity is when the debt must be cleared, and the balance falls through amortisation as each instalment lands. If a need comes and goes rather than arriving once, the business credit facility guide explains why revolving usually fits better than a loan.

The security and risk words

This is the part worth reading twice. Secured finance is backed by an asset; unsecured is not. A debenture gives a lender a claim over company assets, and a guarantor — often a director signing a personal guarantee — promises to cover the debt if the company cannot, putting personal assets on the line. Credicorp's model is deliberately different: it lends to the company, assesses the company's own position, and takes no personal guarantee, explained in how no-personal-guarantee lending works.

The small-print words

Finally the terms that govern what happens later. A covenant is a condition you agree to keep to, a default is a breach of the agreement, and an early repayment charge may apply if you clear the debt ahead of schedule. None of these should be a surprise on the day they bite. If a term on your offer is not covered here, search the glossary directly, or ask before you sign — a good lender will explain its own paperwork plainly.