Funders, brokers and contracts use a lot of words for the same few ideas. Here they are in one place.
- Account debtor
- Your customer, the person who owes you money for a sale. Some agreements let a funder notify your customers to pay the funder directly after a default.
- ACH debit
- An electronic withdrawal from your bank account. How almost every MCA collects its daily or weekly amount.
- Adjustment
- A change to the fixed debit going forward so it matches current sales. Some contracts use this word for forward changes and "reconciliation" for look-backs.
- Anti-stacking clause
- A promise not to take another advance against the same receivables. Usually an event of default if broken.
- Arbitration clause
- A promise to settle disputes with a private arbitrator instead of a court. Read who picks the arbitrator, where it happens and who pays the fees.
- Bank levy
- A court-backed order to your bank to hand over money from your account to pay a judgment. The rules differ by state, and a creditor generally needs a judgment first.
- Blanket lien
- A lien on all or nearly all of a business's assets, not just its receivables. Look at the "collateral" box on the UCC-1 to see which kind was filed.
- Broker / ISO
- The person or company that brought you the offer. Usually paid a commission by the funder, sometimes on top of fees you pay.
- Business days
- Most daily MCAs debit Monday to Friday, about 21 times a month and 252 times a year.
- Chargeback
- A card sale reversed after a customer disputes it. Check whether your contract counts your receipts before or after refunds and chargebacks.
- Collateral
- The property a creditor can claim if you break the deal. In an MCA it is usually your receivables, and sometimes much more.
- Confession of judgment (COJ)
- A signed statement letting a funder get a judgment without a lawsuit after a default. Since 2019, New York only accepts these against New York residents.
- Consolidation
- Using one new financing to pay off several older ones. Ask for the total cost of the new deal next to what you would still owe on the old ones.
- Cross-default
- A clause that makes a default on another agreement, with this funder or with someone else, count as a default on this one.
- Cure period
- The time you get to fix a problem after notice before it counts as a default. Many MCAs give very little, and some give none.
- Daily / weekly amount
- The fixed debit the funder takes. Also called the remittance or periodic payment.
- Debt settlement
- An agreement to pay a funder less than the full balance, or on new terms, to end the debt. Get the final terms in writing before you pay.
- Default
- Breaking a promise in the agreement. Can make the full balance due immediately and add fees.
- Disclosure (commercial financing)
- The written summary of cost and terms that some states require for business financing offers, such as the total amount, the finance charge and an estimated APR. Which states and which deals are covered varies.
- Estimated APR
- An annualized cost some states, including California and New York, require funders to disclose on many offers.
- Event of default
- A specific act listed in the contract that counts as a default, such as blocking debits or changing bank accounts.
- Factor rate
- The multiplier that sets what you owe back. 1.35 on $50,000 = $67,500.
- Forbearance
- An agreement by the funder to accept less, or nothing, for a period. Often comes with new fees or terms.
- Funder
- The company that buys your receivables and provides the advance.
- Guarantor
- The person, usually an owner, who signs to back the business's promises. Check whether the guaranty covers only your own conduct or also the payment.
- Holdback
- Another name for the specified percentage: the share of your sales the funder bought.
- Judgment
- A court's formal decision that you owe a stated amount. With one, a creditor can use court collection tools, such as a bank levy or a restraining notice.
- Jury waiver
- A clause giving up your right to a jury trial if there is a dispute. Courts decide case by case whether to enforce one.
- Lien search
- A search of the public record, usually at the state's UCC filing office, for liens filed against your business name. It shows who has filed and what they claim.
- Merchant cash advance (MCA)
- A purchase of a share of your future sales, paid back through fixed debits that are meant to estimate that share.
- Modification
- A change to your agreement after signing. Read it for new fees, a longer term or waived rights.
- Net funding
- The amount that actually reaches your account after fees and any payoffs are taken out of the purchase price. It can be well below the headline number.
- Notice address
- The address or email the contract names for formal notices. Send letters there, and keep proof of delivery.
- NSF / rejected debit
- A debit the bank returns because the account lacked the funds. Many agreements charge a fee or treat it as a default, so read what yours says.
- Origination fee
- A fee for setting up the advance, usually taken out of the funding.
- Payoff letter
- A letter from the funder stating the amount that pays the balance in full as of a date, and that the debt is satisfied when it is paid. Ask for it before you send money.
- Performance guaranty
- An owner's promise that the business will follow the contract (not block debits, not divert sales). Often does not guarantee payment if sales simply fall.
- Position
- Where an advance stands among several: first, second, third. Later positions usually cost more.
- Prepayment
- Paying off an advance early. Many MCAs owe the full purchased amount whatever the timing, so an early payoff may not save anything unless the contract or the funder says it does.
- Purchase price
- What the funder pays you, before fees.
- Purchased amount / RTR
- What you agree to deliver back. Purchase price times factor rate. RTR means "right to receive".
- Receipts
- The sales your contract counts when it applies the percentage. It may include cash, cards, checks and transfers, and may leave out taxes or refunds. The exact definition controls the math.
- Receivables
- Money owed to your business from sales: card settlements, customer payments, invoices.
- Reconciliation
- Your contract right to have the debits recalculated to the specified percentage of your actual sales.
- Renewal
- A new advance from the same funder that pays off the old balance and gives you the rest.
- Restraining notice
- In New York, a notice served on your bank that holds funds in your account while a creditor with a judgment collects. Rules and limits are set by law.
- Revenue-based financing
- Financing repaid as a share of your revenue until a cap is reached. Some products with this name are loans and some are MCAs, so read the agreement and not the label.
- Sales-based financing
- The term many state disclosure laws use for MCA-type deals: financing repaid from a percentage of your sales or receipts.
- Security interest
- A creditor's legal claim on your property as collateral. A UCC-1 filing is how that claim is made public.
- Sole discretion
- Wording that gives the funder the final say, often on adjustments. Ask how a request is decided, in what time, and whether the contract limits that choice.
- Specified percentage
- The share of your future sales the funder bought. The number reconciliation is built on.
- Split funding
- A setup where your card processor divides each card sale and sends the funder its share directly. You receive the rest.
- Stacking
- Taking more than one MCA at the same time against the same business.
- Subordination
- An agreement that one creditor's claim ranks behind another's. A new lender may ask for it before it will fund you.
- True sale
- The legal idea that an MCA is a real purchase of receivables, not a loan. Reconciliation is a big part of what makes it one.
- True-up
- A look-back reconciliation: comparing what was taken over a past period with what the agreement allowed, and crediting the difference.
- UCC-1 / UCC lien
- A public filing that gives the funder a security interest in your receivables and business assets.
- UCC-3 (termination statement)
- The filing that ends a UCC-1 lien. After you pay in full, you can ask the funder to file one; the UCC sets deadlines once you make a written demand.
- Usury
- Charging more interest than the law allows on a loan. MCAs are written as purchases partly to stay outside usury limits.
- Venue
- The place, such as a county or state, where a dispute must be heard. A venue far from you can make a dispute harder and costlier to fight.
Education only, not legal advice. Agreements differ; your contract's exact wording controls.