Finance, in plain language

A guide to the terms you may encounter when applying for and managing a business facility. The wording and obligations in your own agreement take precedence over these general explanations.

Working capital

Money used for the operating needs of a business, such as stock, wages and supplier payments.

Facility

An agreed finance arrangement. It may provide a set advance or a credit limit with separately approved draws.

Principal

The amount advanced to the borrower, before finance costs and other charges.

Fixed finance cost

A stated dollar cost for the finance under an agreement. Check when it becomes payable and how early repayment is treated.

Factor rate

A repayment multiple sometimes used to describe fixed cost finance. In a simple example, a factor of 1.20 on $20,000 gives $24,000 total repayable. A factor rate is not an annual percentage rate.

Total repayable

The amount the agreement requires you to repay, including principal and the stated finance cost. Check whether any additional or contingent charges sit outside the displayed figure.

Servicing

The ongoing administration of a facility, including repayment records, account enquiries, document requests and reviews. During assessment, servicing capacity also refers to the business’s ability to meet its obligations.

Director guarantee

An undertaking by a director to meet obligations described in the guarantee. Its scope and consequences depend on the document; understand the obligations before signing.

Security

An interest in specified assets supporting repayment obligations. The facility and security documents identify the assets and terms that apply.

General security agreement

An agreement that describes a security interest over business assets. Review the actual document to understand which assets and obligations it covers.

PPSR

The Personal Property Securities Register. Registration may form part of establishing or checking a security position over personal property. A search or registration is one part of the evidence reviewed for a secured facility.

Settlement

The stage when agreed requirements are satisfied and funds are advanced. A recorded settlement should correspond to the actual transfer of funds.

Drawdown

An advance requested against a line of credit. Available credit depends on the facility limit, existing draws and amounts of principal repaid, as well as the agreement and approval requirements.

Direct debit

An authorized arrangement to collect payments from a bank account. An account reference or repayment schedule alone does not establish a direct debit authority.

Dishonour

A payment attempt that the bank does not complete. The reason and any applicable charges should be checked against the bank information and facility agreement.

Arrears

Amounts that remain unpaid after their due date. Contact the team if a payment is missed or you expect difficulty meeting a due payment.

Manual verification

A recorded review of supporting evidence by a person. A manual review is distinct from an automated credit bureau or identity provider result.

Beneficial owner

A person who ultimately owns or controls a business. Assessment may require information about the people behind a company, trust or other structure.

For the amounts and dates that apply to your facility, review your offer and agreement. Raise questions through your borrower account before accepting terms you do not understand.