Commercial Finance Glossary

A standardised measure of the total cost of borrowing expressed as an annual percentage. APR includes the interest rate plus any additional fees and charges, making it easier to compare the true cost of different finance products.

A fee charged by the lender to cover the administrative costs of setting up a finance facility. Arrangement fees are typically between 1% and 2% of the loan amount and may be payable upfront or added to the loan balance.

A form of structured finance where lending is secured against the full range of a company's assets — including receivables, inventory, plant & machinery, and property. ABL facilities are typically larger and more flexible than traditional bank lending.

The interest rate set by the Bank of England, which influences the rates charged by commercial lenders. Many commercial finance products are priced as a margin above the Base Rate.

Short-term secured finance typically repaid within 3 to 24 months. Bridging loans are used to "bridge" a funding gap — for example, purchasing a property before an existing one has been sold, or funding a refurbishment prior to refinancing onto a term loan.

The fee payable to a commercial finance broker for arranging funding on your behalf. At Aberdeen Corporate Finance, our broker fee is typically 1%–5% of the loan amount and is usually contingent on the successful production of a lender offer.

A loan repayment structure where each monthly payment covers both interest and a portion of the original loan amount (capital). By the end of the term, the entire loan is fully repaid.

A court order issued when a debt is not repaid on time. CCJs remain on your credit file for six years and can make securing mainstream finance more difficult — though specialist lenders may still consider applications with CCJs.

A legal claim registered against a property to secure a debt. A first charge takes priority in the event of a sale or default, while a second charge sits behind the first charge holder. Most term loans require a first charge; mezzanine and bridging lenders may accept a second charge.

A long-term loan secured against commercial, semi-commercial, or mixed-use property. Terms typically range from 3 to 25 years with repayment on a capital and interest or interest-only basis.

The final stage of a property transaction or finance arrangement when all legal formalities are concluded, funds are released, and ownership (where applicable) is transferred.

A numerical assessment of a borrower's creditworthiness based on their credit history, existing obligations, and financial behaviour. Lenders use credit scores as part of their decision-making process, though many specialist lenders apply more flexible criteria than high street banks.

A legal document that gives a lender a fixed and floating charge over all of a company's assets. Debentures are commonly required for invoice finance facilities, asset-based lending, and larger business loans.

Specialist funding for property development projects, typically structured as a facility that is drawn down in stages as construction progresses. Lenders will usually fund 60%–70% of the total development cost (or up to 90% with mezzanine).

The investigative process undertaken by a lender (or their appointed agents) to verify the information provided by a borrower. Due diligence may include financial analysis, property valuation, legal review, and sector-specific assessments.

A UK Government-backed scheme (formerly SFLG) that provides a 75% guarantee to lenders on loans to viable SMEs that lack sufficient security for conventional lending. This enables businesses to access finance they might otherwise be declined for.

The value of an asset (typically property) that is not covered by borrowing. For example, if a property is worth £1 million and has a £600,000 mortgage, the equity is £400,000 (40%).

The planned method by which a borrower will repay a short-term loan (particularly bridging finance). Common exit strategies include the sale of a property, refinancing onto a longer-term product, or the receipt of funds from another source.

An invoice finance product where a third-party provider purchases a company's outstanding invoices and advances a percentage of their value (typically 80%–90%). The factor also manages the sales ledger and collects payment from the company's customers.

A long-term leasing arrangement where the lessee (business) rents an asset for most of its useful life. The lessee bears the risks and rewards of ownership, and the asset appears on the company's balance sheet.

An interest rate that remains constant for an agreed period, providing certainty over monthly repayments regardless of changes in the Bank of England Base Rate or other market benchmarks.

The projected market value of a property development upon completion. GDV is a critical metric in development finance, as lenders typically advance a percentage of GDV (usually up to 65%) as part of their funding assessment.

An asset finance product where a business acquires an asset through an initial deposit followed by regular instalments. Ownership transfers to the business upon payment of the final instalment (including any "balloon" or option-to-purchase fee).

A loan repayment structure where monthly payments cover only the interest charge, with the full capital amount repaid at the end of the term (or through a planned exit strategy). Common in bridging finance and some commercial mortgages.

A confidential invoice finance product where a business borrows against the value of its unpaid invoices but retains control of its own credit management and collections process. Customers are unaware of the funding arrangement.

A business arrangement where two or more parties agree to pool resources for a specific project while maintaining their separate identities. In property finance, JV structures commonly involve one party providing equity and another providing development expertise.

A guarantee issued by a bank on behalf of a buyer, promising to pay the seller a specified amount provided that the terms and conditions of the letter of credit are met. Widely used in international trade to reduce payment risk.

The size of a loan expressed as a percentage of the property or asset value. For example, a £700,000 loan against a property valued at £1 million represents a 70% LTV. Lower LTVs generally attract more competitive interest rates.

A corporate transaction where an external management team acquires a controlling interest in a business. MBIs typically require a combination of equity, senior debt, and sometimes mezzanine finance.

A corporate transaction where the existing management team of a company acquires the business from its current owners. MBOs are commonly funded through a combination of management equity, senior debt, and vendor loans.

Subordinated debt that sits between senior secured lending and equity in the capital structure. Mezzanine finance carries higher interest rates than senior debt but provides additional funding — often enabling developers and businesses to achieve higher gearing (e.g., 85%–100% of costs).

Finance provided without requiring conventional proof of income or employment references. Non-status lending is designed for borrowers who cannot demonstrate income through traditional channels — such as the self-employed, contractors, or those with complex income structures.

A leasing arrangement where the lessor retains ownership and the risks/rewards associated with the asset. The lessee pays for the use of the asset over an agreed period, and the asset does not appear on the lessee's balance sheet.

A legally binding commitment by an individual (usually a company director) to repay a business debt if the company is unable to do so. Personal guarantees are commonly required by lenders for SME lending.

Funding that enables the directors of a failed company to acquire the business assets and restart trading under a new entity. Phoenix transactions must comply with the Insolvency Act 1986 and require careful legal structuring.

A facility that provides funding to pay suppliers based on confirmed purchase orders from creditworthy customers. This enables businesses to fulfil large orders without the working capital to fund production or procurement upfront.

The process of replacing an existing loan or mortgage with a new facility — typically to secure better terms, release equity, or consolidate debts. Refinancing is a common exit strategy for bridging loans and development finance.

A transaction where a business sells an asset it owns (typically property or equipment) to a finance provider and simultaneously leases it back. This releases the capital tied up in the asset while retaining its use.

A lending approach where the borrower declares their income without the lender requiring independent verification through payslips, accounts, or tax returns. Self-certification is typically available from specialist lenders for self-employed applicants.

The primary layer of borrowing in a finance structure, which takes priority over all other forms of debt in the event of default. Senior debt carries the lowest risk and therefore attracts the lowest interest rates.

The lender's standard interest rate, which can be changed at the lender's discretion. SVR is typically higher than fixed or tracker rates and is the rate borrowers move to after an initial promotional period expires.

A range of financial products designed to facilitate domestic and international trade by bridging the funding gap between purchasing goods and receiving payment. Includes letters of credit, purchase order finance, and supply chain finance.

A professional assessment of a property or asset's market value, conducted by a RICS-qualified surveyor. Lenders require a valuation to confirm that the asset provides adequate security for the loan being requested.

An interest rate that fluctuates in line with a reference rate (such as the Bank of England Base Rate or SONIA). Monthly repayments increase when rates rise and decrease when they fall.

Equity investment provided to early-stage or high-growth businesses in exchange for a shareholding. Venture capital investors typically seek significant returns and may also provide strategic guidance and industry connections.