Business finance glossary

Plain-English definitions of the financing, tax, and cash-flow terms small business owners encounter most — each linked to the calculator that does the math.

• Factor rate — A merchant cash advance pricing multiplier expressed as a decimal (e.g., 1.35) — not an annual percentage rate.
• APR (Annual Percentage Rate) — The true annualized cost of borrowing, including interest and fees — the standardized measure that lets you compare any two loans.
• SBA 7(a) loan — The SBA's flagship small business loan program — government-guaranteed, up to $5 million, with rates near prime.
• DSCR (Debt Service Coverage Ratio) — Net operating income divided by total debt payments — the core lending metric for business and commercial real estate loans.
• Working capital — Current assets minus current liabilities — the cash available to fund day-to-day business operations.
• EBITDA — Earnings Before Interest, Taxes, Depreciation, and Amortization — the standard proxy for a business's operating cash flow.
• Break-even point — The revenue level at which total sales equal total costs — the point where the business stops losing money.
• Burn rate — The monthly rate at which a business spends its cash reserves — and the metric that determines how long the runway lasts.
• Invoice factoring — Selling accounts receivable to a factoring company for immediate cash at a discount — the business-to-business equivalent of freight factoring.
• Profit margin — Net income divided by revenue — the percentage of each dollar of sales that becomes profit.