Quick answer
Business finance jargon falls into six groups: loan types (term loan, line of credit, invoice finance), security (mortgage, caveat, guarantee, PPSR), costs (establishment fee, comparison of total cost), repayments (principal and interest, interest-only, balloon), assessment (serviceability, LVR, bank statements, credit file) and tax (BAS, GST, PAYG). Knowing these terms helps you compare offers and ask lenders the right questions.
Key points
- Most jargon describes one of six things: type, security, cost, repayment, assessment or tax.
- LVR, serviceability and security are the three ideas lenders lean on most.
- Always compare offers by total cost in dollars, not headline numbers.
- If a term in an offer isn't clear, ask before you sign.
Business finance has a vocabulary problem. Lenders, brokers and accountants use dozens of terms that sound technical but describe simple ideas. This glossary translates them. It’s grouped by topic rather than strictly alphabetically, because knowing which kind of term you’re looking at is half the battle. Bookmark it, and keep it open next time you read a loan offer.
If you’d rather skip the reading and get a shortlist of loan types for your situation, the loan matcher does that in about a minute.
What are the main types of business finance called?
Term loan — A lump sum repaid over a fixed period with regular repayments. Most “business loans” are term loans.
Unsecured business loan — A term loan without a specific asset as security, sized on turnover and bank statements. See unsecured business loans.
Secured business loan — A loan backed by security, usually property. See secured business loans.
Line of credit — An approved limit you draw on, repay and redraw. You’re generally charged on the amount used. See business line of credit.
Overdraft — A bank account facility letting the balance go below zero up to a limit.
Working capital — In accounting, current assets minus current liabilities; in everyday terms, the money needed to run the business between paying costs and getting paid.
Invoice finance — Borrowing against unpaid invoices to business customers. Includes factoring (the financier buys and usually collects the invoices — business.gov.au describes it as a factor company buying a business’s outstanding invoices at a discount) and invoice discounting (you keep collecting, usually confidentially).
Trade finance — Short-term funding to pay suppliers, often overseas, before goods are sold.
Equipment finance — Finance to buy business equipment, secured by the equipment.
Chattel mortgage — A loan to buy a vehicle or equipment where you own the asset from day one and the lender takes security over it.
Hire purchase — You hire the asset and own it after the final payment.
Finance lease — The financier owns the asset and leases it to you for a term, usually with a residual value at the end.
Operating lease — A rental arrangement where you use the asset and return or upgrade it at the end.
Merchant cash advance — A lump sum repaid as a share of future card sales.
Bridging loan — Short-term finance covering a gap until a sale, settlement or refinance.
Caveat loan — A short-term loan secured by a caveat on a property title. In our group, offered over Victorian property only.
Low-doc loan — A loan assessed on alternative income evidence (bank statements, BAS, accountant’s letter) instead of full financials.
No-doc loan — A short-term, property-secured loan relying mainly on equity and exit rather than income documents.
What do the security terms mean?
Security (collateral) — An asset the lender can rely on if the loan isn’t repaid.
Mortgage — A registered security interest over land or property.
First mortgage — The primary, first-ranking mortgage on a property; paid first if the property is sold.
Second mortgage — A mortgage ranking behind an existing first mortgage.
Caveat — Land Use Victoria describes a caveat as a document anyone with a legal interest in a property can lodge, which then appears on the title to put others on notice that a third party may have rights over the property.
Equity — business.gov.au defines equity as the value of ownership interest, calculated by deducting liabilities from assets. In property lending, it’s the property’s value minus what’s owed on it.
LVR (loan-to-value ratio) — The loan divided by the security’s value, as a percentage. Lower is safer for the lender.
Personal guarantee — A promise by a director or owner to repay the business’s debt personally if the business can’t.
General security agreement (GSA) — Security over all, or a class of, a business’s present and future personal property.
PPSR — The Personal Property Securities Register, run by AFSA: the national register where security interests in personal property are registered and searched. Always search it before buying used vehicles or equipment.
Mortgagee — The lender holding a mortgage. Mortgagor — The person or entity granting it.
Discharge — Removing a mortgage or caveat from a title once the loan is repaid.
What are the cost terms to look out for?
Establishment fee — A one-off fee for setting up the loan.
Valuation fee — The cost of valuing property or assets used as security.
Legal or documentation fees — Costs of preparing and registering loan and security documents.
Line fee or account fee — An ongoing fee for having a facility available, sometimes charged even when unused.
Early repayment or break fee — A charge for paying a loan off before the end of its term.
Default fees and interest — Extra charges if repayments are missed.
Capitalised interest — Interest added to the loan balance rather than paid as you go; common on short-term secured loans.
Prepaid interest — Interest paid up front for a period, often deducted from the loan proceeds.
Total cost of finance — Everything you’ll pay over the life of the loan beyond the amount borrowed. This is the number to compare between offers. Every business loan is priced on the borrower’s circumstances, which is why a total dollar figure for your loan matters far more than any advertised number.
What do repayment terms mean?
Principal — The amount borrowed.
Principal and interest (P&I) — Repayments that cover interest and reduce the principal each time.
Interest-only — Repayments that cover interest only for a period; the principal stays the same.
Balloon or residual — A lump sum due at the end of a loan or lease, which lowers regular repayments during the term.
Amortisation — The gradual repayment of principal over a loan’s term.
Term — The length of the loan.
Repayment frequency — Daily, weekly, fortnightly or monthly.
Exit strategy — How a short-term loan will be repaid at the end: a sale, refinance or expected payment.
Refinance — Replacing an existing loan with a new one, often to change terms or release equity.
Consolidation — Combining several debts into one loan. See business debt consolidation.
Our guide to repayment structures explains these in more depth with illustrative examples.
What do lenders mean when they assess you?
Serviceability — Whether the business can afford the repayments from its income after other commitments.
Turnover — Total sales or revenue over a period.
Cash flow — business.gov.au describes it simply as the money flowing in and out of a business.
Bank statement assessment — Reviewing recent business bank statements to verify income and spending patterns.
Debt service cover — A measure of how comfortably earnings cover debt repayments.
Credit file (credit report) — The record held by credit reporting agencies of your credit history. Moneysmart notes you can get a free copy every three months.
Credit enquiry — A lender’s request for your credit file, which can be recorded on it. Enquiring with us doesn’t involve one.
Default — An overdue debt reported to a credit reporting agency.
Aged debtors list — A report showing who owes your business money and how long it’s been outstanding.
Liquidity — business.gov.au describes it as how quickly you can convert assets into cash.
Goodwill — An intangible asset representing the value of a business’s reputation and customer base; important when buying a business.
Letter of offer — The lender’s formal written offer setting out the loan’s terms. Read every page.
What tax terms come up in business borrowing?
ABN / ACN — Australian Business Number / Australian Company Number. Lenders ask for both where relevant.
BAS (business activity statement) — The form businesses use to report and pay GST, PAYG and other tax obligations. The ATO lists quarterly due dates of 28 October, 28 February, 28 April and 28 July.
GST — Goods and services tax. Collected on the ATO’s behalf, so it isn’t really yours to spend.
PAYG withholding — Tax withheld from employees’ wages and paid to the ATO.
PAYG instalments — Regular prepayments of expected income tax.
Super guarantee — Compulsory employer superannuation contributions.
Payday Super — From 1 July 2026, employers pay super with each pay run rather than quarterly.
Instant asset write-off — An ATO concession letting eligible businesses deduct eligible assets under a threshold immediately.
EOFY — End of financial year: 30 June in Australia.
How do you use this glossary when comparing offers?
Take any loan offer and find these five things: the amount you’ll actually receive after fees, the total cost in dollars over the realistic term, the repayment amount and frequency, the security and guarantees required, and any fees for leaving early. If you can find all five and they make sense for your business, you understand the offer. If you can’t, ask the lender — or ask us — before you sign.
Want a human translator?
Jargon shouldn’t stand between you and a good decision. If a term in an offer, a letter or a conversation has you scratching your head, we’re happy to explain it.
When you’re ready to look at real options, there’s no credit check to enquire, your details aren’t scattered around the lending market, and a real person reads your form and calls. Answer the form accurately — amount, purpose, trading time and any property — and we’ll put the right words and the right loan in front of you. Start your enquiry.
Frequently asked questions
What does LVR mean in business lending?
Loan-to-value ratio: the loan amount divided by the value of the security, shown as a percentage. Lenders use it to judge how much equity cushions their loan.
What is serviceability?
Serviceability is a lender's assessment of whether your business can afford the repayments from its income, after its other commitments.
What's the difference between secured and unsecured?
A secured loan is backed by an asset such as property or equipment that the lender can rely on if it isn't repaid. An unsecured loan has no specific asset pledged, though a personal guarantee is common.
What is the PPSR?
The Personal Property Securities Register is the national register where security interests in personal property — such as equipment and vehicles — are registered and searched.
Where can I find official definitions of financial terms?
business.gov.au publishes a key financial terms page covering accounting basics such as assets, cash flow, equity, factoring, goodwill and liquidity.