The glossary
The words on the paper, in plain English.
52 terms a business owner meets in a financing conversation or a credit review, defined the way we would explain them across a table. Where a term has a brief or a page behind it, the link is there.
52 terms
ACH debit
An electronic withdrawal from a bank account. Most advances and many loans collect their payments this way, on a fixed schedule, without a check.
Adjusted EBITDA
Earnings before interest, taxes, depreciation and amortization, restated to remove owner compensation above market, 1 time items and non operating costs. It is the number a buyer or an institutional lender prices from, and it is rarely the number on the tax return.
Adverse action notice
The written notice a lender or other user of a consumer report must give when it declines, or offers worse terms, based on information in that report. It names the reporting company, which is where a review of the file starts.
Asset based lending
A facility sized on specific assets, usually receivables, inventory or equipment, with availability that moves as the assets move. The lender monitors the collateral, not only the cash flow.
Average daily balance
What an operating account holds on a typical day across the month. Underwriters read it as the cushion a business has to absorb a new payment without going negative.
Bank statement underwriting
A read of the business from its bank statements before anything else: deposits, their count and consistency, what leaves the account before the owner sees it, and whether anything has been altered. Most funding decisions on smaller files are made here.
Blanket lien
A security interest over all of a business's assets, filed as a UCC-1. Common in advances and working capital loans. It sits in the public record until it is terminated, and every later lender reads it.
Bridge loan
Short term financing that carries a business between 2 events, such as a contract award and its first payment, or a sale and its closing. It is priced for speed and is meant to be repaid by the event it bridges.
Business credit file
The commercial report on the company itself, kept by companies such as Dun and Bradstreet, Experian Business and Equifax Business. It records company information and reported payment experience, and it is separate from the owner's personal report.
Call protection
The premium a borrower pays to repay a loan early, commonly 102 percent of par in year 1 and 101 in year 2, or a make whole payment in the first year. It is why refinancing an institutional facility early is priced before it is decided.
Collateral
The asset a lender can take if the obligation is not paid: receivables, equipment, inventory, real estate or a blanket lien over everything. Collateral shapes which facility fits and how it is priced.
Confession of judgment
A clause in which the borrower agrees in advance that the lender may enter a court judgment without a trial if the borrower defaults. Some states restrict or refuse them. Read any agreement for it before signing.
Consolidation
Replacing several obligations with 1 facility so that the old ones are paid off and only the new payment remains. A position buyout is a consolidation. A reverse consolidation is not, whatever the name says.
Covenant
A promise inside a loan agreement to do or not do something while the loan is outstanding: keep a minimum balance, deliver financial statements, take on no other debt. Breaking 1 is a default even when every payment is on time.
Credit repair
A service that promises to improve a consumer's credit for a fee. Under federal law such organizations cannot remove accurate, current negative information, cannot charge before the work is done, and must give the right to cancel. Citadel Ridge does not offer credit repair; credit advisory is education and credit management.
Credit report and credit score
The report is the record: accounts, balances, payment history, inquiries. The score is a number calculated from that record by a scoring model on a given date. 1 person can have many scores. The report is what to read; the score is a summary of it.
Debt schedule
A single table of every obligation on the business: lender, original amount, current balance, payment, frequency, maturity and collateral. It must agree with the debits in the bank statements, and an underwriter will check.
Debt service coverage ratio
Cash available to pay debt divided by the debt payments due in the same period. Above 1 means the business covers its payments with room to spare; below 1 means it does not. Institutional lenders set a minimum and test it.
Debt settlement
Negotiating with creditors to accept less than the full balance, usually while payments stop. It is a distinct service with its own risks and is not something Citadel Ridge provides. A position buyout pays every position in full.
Delayed draw term loan
A committed term loan tranche that is not funded at closing but can be drawn later, usually for acquisitions or capital expenditure, for a set window. An unused fee is charged on the undrawn amount. Abbreviated DDTL.
Dispute
A written request to a reporting company, or to the business that supplied the information, to investigate an entry you believe is inaccurate or incomplete. It is free, you can file it yourself, and it does not guarantee removal.
Equipment financing
A loan or lease secured by the equipment it buys. The equipment is the collateral, so the facility is sized on its value and useful life rather than only on cash flow.
Equity cure
The owner's negotiated right to inject cash that is counted as earnings for covenant purposes, curing a breach that would otherwise be a default. Limited in how often and how many times it can be used, and negotiated before closing, not after.
Factor rate
The multiplier on an advance. The amount funded times the factor rate is the total to be repaid. A factor rate is not an interest rate: it does not fall as the balance is paid down, so the true annualized cost depends entirely on how fast the money is repaid.
Factoring
Selling invoices to a funder at a discount for immediate cash, with the funder collecting from the customer. It is sized on the customers' credit rather than the business's own, which is why it fits companies with strong customers and thin balance sheets.
First out, last out
The split inside a unitranche facility that decides which lenders are repaid first if the borrower defaults and which are paid a higher rate to wait. Invisible to the borrower in normal times and decisive in a workout.
Holdback
The share of daily card or bank receipts that a funder takes until an advance is repaid, expressed as a percentage. With a fixed daily debit the holdback is replaced by a set amount; either way it is money that leaves before the owner sees it.
Incremental facility
A pre negotiated right in the loan agreement to add debt under the same terms later, up to a dollar cap or a leverage test, without renegotiating the whole document. Also called an accordion.
Intercreditor agreement
The contract between senior and junior lenders to the same borrower setting who is paid first, how long the junior lender must stand still after a default, and who controls enforcement. Mezzanine and private credit closings depend on it.
Line of credit
A facility the business can draw on, repay and draw again up to a limit. Interest is charged on what is drawn. It suits recurring or seasonal needs rather than a single purchase.
Merchant cash advance
A purchase of a business's future receivables at a discount, repaid through a fixed daily or weekly remittance or a holdback on receipts. It is fast and expensive, and it is the product most often stacked.
Mezzanine
Capital that sits between senior debt and equity, usually subordinated debt with a higher return and sometimes a warrant or conversion right. It fills the gap when senior lenders will not go further and the owner will not sell more equity.
Net deposits
Gross deposits less transfers between the business's own accounts, loan or advance proceeds and returned items. This is the revenue figure every facility is actually sized on, and it is usually smaller than the number the owner has in mind.
Original issue discount
A loan funded at less than its face amount, commonly 1 to 3 points, so the borrower receives 97 to 99 cents on the dollar and repays 100. It raises the all in cost above the stated rate and belongs in any comparison of offers. Abbreviated OID.
Personal guarantee
The owner's personal promise to repay if the business does not. It makes the owner's personal credit and assets part of the file, which is why the personal report matters even for a business loan.
PIK interest
Payment in kind: interest that is added to the loan balance instead of paid in cash each period, priced above the cash rate. A PIK toggle lets the borrower choose, period by period, which to do. Common in mezzanine and in rescue facilities.
Position
An outstanding advance or short term loan on a business, counted in the order it was taken: first position, second position and so on. Each 1 adds its own daily or weekly debit.
Position buyout
A single facility that retires every existing position in full at closing and replaces the daily and weekly debits with 1 monthly payment. The old funders are paid off; nothing is settled for less. It is the first move for a business carrying a stack.
Position schedule
The debt schedule for advances specifically: each funder, balance or payoff figure, remittance amount, frequency and remaining term. It is the first thing a buyout lender asks for.
Private credit
Loans made by non bank lenders such as credit funds, typically larger, longer and more structured than a working capital loan, and priced on the business's cash flow and collateral rather than on a bank's rulebook.
Renewal
Taking a new advance from the same funder before the old 1 is repaid, with the new proceeds used partly to pay off the old balance. It resets the factor rate on the whole amount, and the cost compounds with each cycle.
Reverse consolidation
New advance money deposited into the account in weekly pieces to cover the daily debits of the existing positions, which all stay alive underneath. The total owed goes up. It is the opposite of a buyout and is often sold under a similar name.
Security freeze
A restriction on who can access a consumer credit file for new credit decisions, placed separately with each nationwide bureau. It does not correct errors and it does not erase anything; it must be lifted for a legitimate application to proceed.
Springing covenant
A financial covenant that is tested only when a trigger occurs, most often when a revolver is drawn above a set share of its commitment. Until the trigger, the borrower reports but is not tested.
Stacking
Taking additional advances on top of an existing 1, so that 2, 3 or more positions debit the same account. Each new position is priced for the ones already there, and the combined remittance is what drives businesses to a buyout.
Term loan
A fixed amount borrowed for a fixed period and repaid on a schedule, usually monthly. The simplest facility to understand and, for a business that qualifies, usually the cheapest.
True cost
The annualized cost of an advance once the factor rate, the repayment speed and any fees are put on the same footing as an interest rate. It is the only way to compare an advance with a loan, and it is almost always higher than the factor rate suggests.
UCC-1 filing
The public notice a lender files to record its security interest in a business's assets. Filings are searchable by anyone, including every later lender, and a stale filing left behind by a paid off funder can block a new facility until it is terminated.
Underwriting
The lender's process of deciding whether to fund, how much and on what terms, from the bank statements, the debt schedule, the financial statements and the application. Citadel Ridge prepares the file for it; the decision is always the lender's.
Unitranche
A single first lien facility that blends what would have been senior and subordinated debt into 1 rate and 1 loan agreement, commonly split behind the scenes into first out and last out pieces among the lenders. Simpler for the borrower, and the reason 1 direct lender can fund what used to take 2.
Utilization
On a personal report, revolving balances as a share of available limits. Scoring models weigh it, but the reported balance can differ from today's online balance, and there is no universal point change for paying it down.
Working capital
The money a business needs to run day to day: payroll, inventory, rent and the gap between paying suppliers and being paid by customers. Most short term facilities exist to fund it.
Definitions are general education, not legal or financial advice, and describe how these terms are commonly used. Agreements define their own terms; read the document in front of you. No rate, amount, timeline or outcome is implied by any definition here.
Start with the file
A straight read within 2 business days.
Send the basics through the intake form: what the file supports, what is missing, and the next step if there is one. If we are not the right desk for it, we say so.