Franchise Financing Lingo

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.