UK business finance glossary
Working definitions of the terms UK SMB lenders use. We use these definitions consistently across reviews, listicles and guides. 51 terms.
A
Amortisation
The schedule by which a loan principal is repaid over its term. A fully amortising loan has equal monthly payments that clear both interest and principal by the final payment. Interest-only and balloon structures amortise differently, leaving a lump sum at the end.
APR (Annual Percentage Rate)
The annualised cost of borrowing including interest and most fees. The single best apples-to-apples cost figure across UK loan products. Per-month rates and factor rates have to be converted to APR for comparison.
Arrangement fee
A one-off fee a lender charges to set up a facility, usually 1% to 5% of the loan, either paid up front or added to the balance. It is part of the effective APR even when the headline rate looks low.
Asset finance
A loan secured against a specific asset (vehicle, plant, machinery, IT, fit-out). Three structures in UK use: hire purchase, finance lease, operating lease. Asset acts as primary security, which lowers eligibility hurdles versus unsecured term debt.
B
Balloon payment
A large final payment at the end of an asset finance or term-loan agreement, used to keep monthly payments low. Common on vehicle and equipment finance. The borrower either settles it, refinances it, or returns the asset.
Bank of England base rate
The UK central bank rate that anchors most UK SMB lending. SVR-linked products move with it directly; fixed-rate products are priced relative to expected base rate over the term. Currently 3.75% as of March 2026. Set by the Bank of England Monetary Policy Committee.
Bounce Back Loan (BBL)
UK government scheme run 2020 to 2021, £2k to £50k loans at 2.5% over 6 years, delivered through the British Business Bank. Repayment now due. Active or unpaid BBLs materially limit current SMB borrowing options.
Bridging loan
Short-term secured borrowing (typically 1 to 18 months) used to bridge a funding gap, often property purchase before a sale completes. Priced per month, not per year, and almost always secured against property.
C
CCJ (County Court Judgment)
A registered debt the court has ruled you must pay. Visible on your credit file for six years. A satisfied CCJ is materially better than an unsatisfied one for lender underwriting.
CIS (Construction Industry Scheme)
HMRC scheme governing tax deductions on subcontractor payments in UK construction. CIS retentions (typically 5%) are held against defects and lock cash for 6 to 12 months. Lenders that understand construction underwrite on net-of-retention turnover. Full rules on gov.uk.
Commercial mortgage
A long-term loan secured against business premises or investment property, typically 15 to 25 years. Lower rates than unsecured term debt because the property is primary security. Repayment or interest-only structures available.
Companies House number
Unique identifier issued by the UK registrar to incorporated companies. Used by lenders to verify company status, filing history and director records before approving SMB lending. Searchable on the Companies House register.
Corporation Tax
UK tax on company profits, administered by HMRC. A Corporation Tax bill colliding with thin cashflow is a common trigger for short-term borrowing. See our Corporation Tax pressure guide.
D
Debenture
A loan agreement secured against company assets. Includes fixed charge (specific named assets) and floating charge (whole asset pool). Registered at Companies House.
Decline reason
The lender-stated cause of an application rejection. Most reputable UK SMB lenders will provide one in writing on request. Knowing the reason is the first step to routing the application to a specialist lender.
Default
A breach of the loan agreement, usually a missed payment, that lets the lender demand repayment, enforce security or call a personal guarantee. Recorded on credit files and visible to future lenders. Different from arrears, which is simply being behind on payments.
Director loan
Money a director lends to or borrows from their own company, recorded in the director loan account. An overdrawn director loan account can complicate underwriting and may have tax consequences under HMRC rules.
E
Effective APR
The true cost of borrowing once all fees, charges, factor-rate compounding and prepayment economics are factored in. Often higher than the headline APR for non-standard products like MCA.
Eligibility checker
A pre-application tool that uses a soft credit search to test which lenders are likely to approve. No impact on credit file. Used by reputable broker panels and direct lenders to filter before a hard search.
F
Factor rate
MCA pricing structure. Total repayment is the loan multiplied by the factor (e.g. 1.30 means £100k borrowed becomes £130k repaid). Disguises true APR.
FCA (Financial Conduct Authority)
UK regulator covering consumer-credit lending and most retail financial services. Commercial lending to limited companies is generally outside its perimeter. See the FCA.
FCA FRN (Firm Reference Number)
Unique number assigned by the FCA to authorised firms. Searchable on the FCA Register. Required for any firm carrying out FCA-regulated activity in the UK.
Floating charge
A debenture charge that floats over a class of company assets (typically stock, debtors, equipment) until crystallised by an enforcement event. Allows the company to deal with assets in the ordinary course of business.
G
Growth Guarantee Scheme
The British Business Bank scheme that succeeded the Recovery Loan Scheme. Provides a government-backed guarantee on a portion of lender loss to encourage SMB lending, accessed only through accredited lenders.
Guarantor
A person or company that agrees to repay a debt if the borrower cannot. On UK SMB loans the guarantor is usually a director giving a personal guarantee. The guarantee is a separate, enforceable contract from the loan itself.
H
Hard search
A credit check visible to other lenders that may impact your score. Most reputable UK SMB lenders use soft search at quote stage.
Hire purchase (HP)
Asset finance structure where you pay a deposit and fixed monthly instalments, then own the asset at end of term. Best for assets you keep long term. Tax-deductible interest, asset on balance sheet.
I
Invoice finance
Working-capital facility advancing 80% to 90% of an unpaid client invoice on issue, balance on payment. Two structures: factoring (lender chases payment) and invoice discounting (you chase, customer unaware). See sister site MarketInvoice for the full UK comparison.
IVA (Individual Voluntary Arrangement)
A formal agreement to repay creditors over a fixed period, typically five years, as an alternative to bankruptcy. Sits on personal credit file for six years. Most UK SMB lenders decline applications from undischarged IVA borrowers.
K
KYC (Know Your Customer)
Anti-money-laundering checks every UK lender must run before funding. Verifies director identity, address, source of funds. Required by the Money Laundering Regulations 2017.
M
MCA (Merchant Cash Advance)
Loan repaid as a percentage of daily card-machine takings. Best fit when card flow is the dominant revenue channel.
O
Operating lease
Asset finance structure where the lender retains ownership and residual risk. You pay monthly rentals, return the asset at end of term. Best for assets you replace on a cycle (vehicles, IT). Off-balance-sheet under FRS 102 in some cases.
Overdraft (business)
A revolving facility attached to a business current account that lets the company spend beyond its balance up to an agreed limit. Interest is charged only on the drawn amount. Largely replaced by flexi-loans and revolving credit lines for SMB working capital.
P
PAYE / NIC arrears
Unpaid Pay As You Earn income tax or National Insurance contributions owed to HMRC. A common cashflow pressure point; HMRC can escalate quickly. A Time to Pay arrangement or short-term finance may be the right answer depending on the situation.
Personal guarantee (PG)
Director's personal commitment to repay if the company cannot. Required by most UK SMB lenders. Limited PGs cap exposure; non-recourse PGs do not exist in the strict sense.
PRA (Prudential Regulation Authority)
UK regulator for banks, building societies and insurers, part of the Bank of England. PRA-regulated banks (Allica, OakNorth, high-street banks) operate under stricter capital and liquidity rules than non-bank lenders.
R
Recovery Loan Scheme (RLS)
British Business Bank scheme launched 2021 to support post-COVID UK SMBs, now succeeded by the Growth Guarantee Scheme. Government-backed guarantee on a portion of lender loss, accessed via accredited lenders.
Revenue-based financing (RBF)
Funding repaid as a fixed percentage of revenue until a pre-agreed total is met. Common on marketplace platforms (Amazon, Shopify, eBay) where the platform underwrites against sales data. Same-day funding, factor rate typically 1.10 to 1.25.
Revolving credit facility
An approved credit line the business can draw down, repay and redraw as needed, paying interest only on the drawn balance. More flexible than a term loan for fluctuating working-capital needs.
S
Sale and leaseback
You sell an existing owned asset to a finance lender at market value, then lease it back on a fixed term. Releases tied-up balance-sheet cash. Common in UK manufacturing and construction for paid-down plant.
SIC code
UK Standard Industrial Classification code identifying your business sector. Lenders use it for sector-based underwriting and pricing. Full list on Companies House; codes published on gov.uk.
Soft search
A credit check that does not affect your score and is not visible to other lenders. Used at quote stage by reputable UK SMB lenders.
Start Up Loan
A British Business Bank scheme: £500 to £25k personal loan for business purposes, fixed 6% APR over one to five years. Available to UK residents starting or running a business under three years old. No company PG required because it is structured as a personal loan.
T
Term loan
A fixed-amount loan repaid over a fixed period at a fixed or variable rate. The most common UK SMB debt structure. Predictable monthly cost. Pre-payment fees vary by lender.
Time to Pay (TTP)
A formal instalment arrangement with HMRC to clear a tax debt over time, typically up to 12 months. Often cheaper than borrowing. See our HMRC Time to Pay guide.
Trustpilot
Public review platform widely used by UK SMB lenders. Score and review volume are signal but not gospel: high-volume lenders accumulate complaints proportionally; small specialists may have inflated scores from a narrow review base.
Turnover floor
Minimum annual turnover a lender will consider. Often unpublished. Working figures: £100k+ for £50k unsecured term loans; £250k+ for £150k tickets; £2m+ for £500k+ unsecured. MCA and asset finance use different thresholds (card flow, asset value).
U
Unsecured loan
A loan with no specific asset pledged as security. Underwritten on company strength and director PG. Prices higher than secured equivalents because the lender has fewer recovery routes on default.
V
W
Winding-up petition
A formal court application by a creditor (often HMRC) to force a company into compulsory liquidation over an unpaid debt. The most serious stage of enforcement. Once a petition is advertised, bank accounts are usually frozen. Seek a licensed insolvency practitioner before borrowing.
Working capital
The cash a business needs to fund day-to-day operations: stock, payroll, supplier payments and the gap between paying out and getting paid. Most short-term SMB borrowing (overdrafts, invoice finance, revolving credit, MCA) funds working capital rather than capital expenditure.
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