By Gerri Detweiler of Nav
Over the last year I’ve spoken at a number of Air Force bases and learned quickly that the military has its own language. Military families don’t move to another base — they PCS. On base, they don’t run to the store, they go to the PX or BX.
(Photo courtesy of Gerri Detweiler)
Similarly, entrepreneurs who seek financing often find themselves thrown into a world of terminology that may seem foreign at first. Understanding these terms, though, can be helpful if you are looking for financing. Here are ten business financing terms you should know:
This acronym stands for “Days Beyond Terms,” which in turn describes payment history on business credit reports. If a bill is due 30 days after the invoice date (Net 30) and you pay 35 days after the invoice, for example, your account is 5DBT. Payment history affects business credit scores, which in turn can affect the funding for which your business may be eligible.
A unique identifier for your business within the D&B commercial credit reporting database. You will need one if you want to build business credit, apply for a government contract, or in some cases, work with major retailers.
FICO’s LiquidCredit SBSS score is a business credit score that runs on a scale of zero to 300 — the higher number represents less risk — and is used by more than 7,000 lenders to help them make credit decisions. It is also used to prescreen many SBA loans; in those cases a minimum score of 140, though many lenders want to see a score of 160 or above.
A business credit score created by Experian to help companies make credit decisions. It runs on a scale of 1 — 100, with a higher score indicating less risk.
Merchant Cash Advance (MCA)
A short-term financing product that advances funds to businesses based on expectations of future sales. MCAs are typically repaid by deducting funds from a merchant’s credit and debit card sales.
The North American Industry Classification System (NAICS) and Standard Industrial Classification (SIC) codes are used to identify the industry in which a business operates. For credit purposes, this code may affect a company’s commercial credit rating and the type and amount of funding for which they are eligible.
A popular business credit score created by D&B. It runs on a scale of 0 to 100, and an excellent score generally falls in the range of 80 to 100. Paydex is often used by vendors and suppliers to judge your business when determining what terms to extend on trade credit.
A personal guarantee, which means the business owner agrees to be personally responsible for a debt the business does not repay it. Business owners that have not established strong business credit ratings are often required to sign PGs.
Industry-speak for “account.” You’ll need tradelines that appear on your business credit reports in order to build business credit. You should aim for at least 3-4 tradelines reporting to D&B to establish a solid Paydex score.
UCC stands for “Uniform Commercial Code,” and a UCC-1 financing statement is a legal form a creditor will file to indicate it may have a security interest a debtor’s assets. UCC filings can appear on business credit reports and impact business credit scores.
Gerri Detweiler is head of market education for Nav, which helps small business owners monitor and build strong personal and business credit, and create financially healthy companies. She is also co-author of a new book, Finance Your Own Business.
The views, opinions and positions expressed within this guest post are those of the authors alone and do not represent those of CBS Small Business Pulse or the CBS Corporation. The accuracy, completeness and validity of any statements made within this article are verified solely by the authors.