Business finance glossary
Plain-English definitions of the terms you'll meet when borrowing for a business, with links to the guides that explain them in detail.
AFCA
The Australian Financial Complaints Authority is the free, independent dispute scheme for financial services. It can hear small business complaints about business finance, but only against lenders that are AFCA members, and some lenders that only serve businesses aren't required to join.
More: Private lenders
ATO payment plan
An arrangement with the Australian Taxation Office to pay a tax debt in regular instalments. The general interest charge keeps accruing during the plan, and new lodgements and payments must stay on time or the ATO can cancel it.
More: ATO payment plans: what happens if you default, and your options
Balloon payment
A lump sum left owing at the end of an equipment or vehicle finance term, also called a residual. It lowers the regular repayments but has to be paid, refinanced or covered by a trade-in when the term ends.
More: Equipment finance
BAS (business activity statement)
The form businesses lodge with the ATO to report and pay GST, PAYG withholding and other tax obligations, usually monthly or quarterly. Most lenders want BAS lodgements up to date before they fund a tax debt.
More: ATO debt funding
Bridging finance
A short-term loan that covers the gap until a known event repays it, such as a property settlement or refinance. Closed bridging has a fixed, documented exit. Open bridging has an expected exit that isn't locked in, and costs more.
More: Bridging finance
Business purpose declaration
A signed statement that a loan will be used mainly for business purposes. It moves the loan outside consumer credit law, so it must be genuine. Loans for personal use need a licensed consumer credit process.
More: Property-backed loans
Capitalised interest
Interest added to the loan balance instead of being paid monthly. It is common in bridging and private loans: there are no monthly repayments, but the debt grows, so the sale or refinance has to cover the final balance.
More: Bridging finance
Caveat
A notice lodged on a property's title that records someone's claimed interest in the land. It warns anyone searching the title and generally stops conflicting dealings being registered until the caveat is withdrawn, lapses or is removed.
More: Caveat loans
Caveat loan
A short-term business loan secured by a caveat on a property title instead of a registered mortgage. Caveat loans can settle within days and usually run for one to twelve months, at a higher cost than mortgage lending.
More: Caveat loans
Chattel mortgage
An equipment or vehicle loan where the business owns the asset from day one and the lender holds a security interest over it. A GST-registered business can usually claim the GST on the purchase price as a GST credit.
More: Equipment finance
Credit representative
A person or business authorised by an Australian Credit Licence holder to provide credit services on its behalf. Fund Fox is authorised under LMG Broker Services Pty Ltd, Australian Credit Licence 517192.
More: About FundFox
Default interest
A higher interest rate a lender charges when repayments are missed or a loan runs past its expiry date. It is common in private and short-term lending, so check the default terms before signing.
More: Private lenders
Director penalty notice (DPN)
An ATO notice that can make a company director personally liable for unpaid PAYG withholding, GST and super guarantee charge. The ATO can recover the penalty 21 days after issuing the notice. A lockdown DPN can generally only be cleared by paying the debt.
More: Director penalty notices explained: the 21-day window and your options
Equity
The difference between a property's value and the loans secured against it. Lenders use available equity, within their maximum loan-to-value ratio, to decide how much a business can borrow against the property.
More: Property-backed loans
Establishment fee
A one-off fee a lender charges to set up a loan, usually deducted from the amount advanced. On short-term loans it can make up a large share of the total cost, so compare loans on the total dollar amount repayable.
More: Caveat loans
Exit strategy
How a short-term loan will be repaid at the end of its term, such as a property sale, a refinance to a bank or a large contract payment. Private, caveat and bridging lenders weigh the exit as heavily as the security.
More: Private lenders
Finance lease
An equipment finance arrangement where the lender owns the asset and the business pays rent for an agreed term, with the option to buy it for a residual value at the end. Lease payments are generally deductible.
More: Equipment finance
First mortgage
The registered mortgage that ranks first on a property title. If the property is sold, the first mortgagee is repaid before any second mortgage or caveat holder.
More: Second mortgages
Full-doc and low-doc loans
A full-doc loan is assessed on tax returns and financial statements. A low-doc loan uses alternatives such as an accountant's letter, BAS or bank statements, usually with a larger deposit and a higher rate.
Garnishee notice
A legal notice from the ATO that requires a third party, such as a bank or customer, to pay money owed to a taxpayer directly to the ATO. The ATO sends a warning letter before issuing one.
More: Received an ATO garnishee notice? What it means and what to do next
General interest charge (GIC)
Interest the ATO charges on overdue tax debts. It is set quarterly at the 90-day bank bill yield plus 7 percentage points, compounds daily and, from 1 July 2025, can no longer be claimed as a tax deduction.
More: ATO interest is no longer tax-deductible: what the GIC change means for your business
Hire purchase
An equipment finance arrangement where the lender owns the asset until the final payment is made, after which ownership passes to the business.
More: Equipment finance
Invoice finance
Funding that advances most of the value of unpaid customer invoices, so a business doesn't have to wait 30 to 90 days to be paid. The lender is repaid when the customers pay.
More: Cash flow finance
Line of credit
An approved business borrowing limit that can be drawn down and repaid as needed, with interest charged only on the amount used. It suits uneven or seasonal cash flow.
More: Cash flow finance
Loan-to-value ratio (LVR)
The loan amount as a percentage of the security property's value. Many private lenders cap first mortgages at around 65% to 75% LVR, and many commercial lenders at around 65% to 70%.
More: Property-backed loans
Personal guarantee
A promise by a director or owner to repay a business loan personally if the business can't. Most unsecured business lenders require one.
More: Cash flow finance
Private lender
A non-bank funder, such as a private credit fund, mortgage fund, family office or experienced investor, that makes business loans secured by property, assessed mainly on the security and the exit plan.
More: Private lenders
Residual stock loan
A loan secured against completed but unsold units in a development. It lets a developer repay the construction lender and sell the remaining stock over time.
Second mortgage
A registered mortgage over a property that already has a first mortgage. The second lender ranks behind the first, and most first lenders must consent before it is registered.
More: Second mortgages
Unsecured business loan
A business loan with no specific asset pledged as security, assessed mainly on trading history and bank statements. It usually needs a personal guarantee and costs more than secured lending.
More: Cash flow finance
General information only. It doesn't take your circumstances into account and isn't tax, legal or financial advice.
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