Glossary: Small Business Lending

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Term Definition
5 Cs of credit The 5 Cs of credit, a framework some lenders use to evaluate borrowers; includes: character, collateral, capital, conditions, and capacity.
Accounts receivable financing When businesses sell its receivables to a third party at a discount – allowing for the business to get cash earlier (as opposed to waiting for its customers to pay them).
C&I loans Commercial and industrial loans — or business credits unrelated to real estate.  The term is “commonly used to designate loans to a corporation, commercial enterprise, or joint venture that are not ordinarily maintained in either the real estate or consumer installment loan portfolios,” according to the Philadelphia Federal Reserve Bank.
Cash advances A service provided whereby a borrower provides a check payable to the lender for the amount that he or she wants to borrow, in addition to a fee that must be paid for borrowing.
Cash flow Typically calculated as cash receipts less cash payments over a certain period of time.  There is often a lag between when you have to pay your suppliers and employees and when you actually collect cash from customers.
CDFI Community development financial institution – a financial institution that provides financial services to under-served/low-income markets.  In the US, they are certified by the US Department of Treasury, and historically evolved from “self-help” credit solutions created by communities that were ignored and under-served.
Community bank Generally used to describe banks with less than $1 billion of assets, and which have a narrow geographic scope anda primary focus on loans and core deposits.  Community bankers often describe their banking as relationship driven, instead of transaction based.
CPA Certified public accountant; e.g.,a professional designation sometimes broadly used to describe an accountant.  CPAs provide a wide array of services, including auditing financial statements, financial analysis and planning, tax preparation, etc.
Credit score Also known as a FICO score, credit scores are a 3-digit number that summarizes your creditworthiness, raning from 300 (the worst) to 850 (best).
Credit union Member owned financial cooperatives – those who have accounts with their credit unions are the owners of the credit unions.
Field of membership (FOM) Field of membership – used to denote the requirements for credit union membership.  Eligibility can often be geographic or employer/association based.
JOBS act Jumpstart Our Business Startups Act (JOBS Act): a law to encourage funding of small business by easing some regulations – passed in April 5, 2012.
Member Business Lending (MBL) Refers to proposed legislation to increase credit union member business lending cap from 12.25% of assets to 27.5% for well-capitalized credit unions.
Microlender Refers to lenders that extend very small loan amounts (typically <$50,000); often community based lenders.
Prepayment penalty A penalty levied if a loan is repaid earlier than the agreed upon terms, typically put in place to protect the lender and ensure that its anticipated yield on the loan will be earned.
SBA  U.S. Small Business Administration, a government agency dedicated to providing support to small businesses.
SBA 7(a) loan The SBA’s most common loan program; A 7(a) loan typically offers more flexibility, longer terms, and lower down payments, compared to traditional types of business financing because it is backed by a SBA guarantee.Because it is backed by a SBA guarantee, you can access larger lump sum funding to fund start-up costs, equipment, inventory and working capital.
SBDC Small Business Development Centers (SBDCs) provide technical assistance to small businesses and aspiring entrepreneurs.  The SBDCs are made up of a collaboration of SBA, state and local governments, and private sector funding resourcesand are available virtually anywhere with 63 networks branching out with 900+ delivery points throughout the U.S.
SCORE SCORE is a nonprofit association dedicated to helping small businesses get off the ground, grow and achieve their goals through education and mentorship. SCORE provides mentorship, counseling, tools, and workshops – all free or inexpensive.
Working capital Capital used in a company’s daily operations, technically defined as current assets less current liabilities.