Here you will find a full glossary of helpful franchise financing and loan terms.
Amortization – To provide systematic equal amounts of money in order to replenish the full loan amount.
Asset – Something of value against which you can borrow money
Balloon – When the final payment in a loan is greatly higher than prior payments.
Cash flow lending – When a bank provides a loan based solely on the cash flow of the borrower.
Collateral – Assets a borrower provides the bank with as security to ensure loan repayment. If borrower defaults on loan, the collateral assets are the bank’s property.
Debt financing – borrowing another person’s money and paying rent for using it.
Demand loan – A type of loan where the bank can force the borrower to repay at any given time.
Equity financing – selling a part of your ownership therefore relinquishing some control.
Interest – The cost of borrowing money, expressed as a percentage of the total amount.
Lien – An example would be the security interest earned on a mortgage. Something a creditor will claim on property.
Principal - The dollar amount of a loan where interested is owed.
Secured debt - is debt that is attached to a reasonable amount of collateral.
Security interest – A bank’s lien. (see lien definition above).
Term loan – A loan outlining specific time periods when repayment is due.
