Legal
Legal terms. Defined.
UCC filings, personal guarantees, contracts, and the regulations that govern small business lending.
All entries
Every legal term.
15 terms
Legal
Adverse Action Notice
An adverse action notice is a written statement a lender must send when they deny credit, explaining the principal reasons for the decision.
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Blanket Lien
A blanket lien is a security interest covering all business assets, equipment, inventory, receivables, rather than one specific item.
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Collateral
Collateral is a specific asset pledged to secure a loan, the lender can seize and sell it if the borrower defaults.
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Default
Default is a borrower’s failure to meet the terms of a loan, typically missed payments, covenant breach, or unauthorized second financing.
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ECOA (Equal Credit Opportunity Act)
ECOA is the federal law prohibiting discrimination in any credit transaction based on race, sex, age, national origin, religion, marital status, or public assistance.
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Guarantor
a.k.a. co-signer, personal guarantor, surety
A guarantor is a person or entity that agrees to repay a loan if the primary borrower defaults.
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Junior Lien
a.k.a. second lien, second-position lien, subordinate lien
A junior lien is a security interest that ranks behind an existing senior lien on the same collateral, also called a second-position or subordinate lien.
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Lien
A lien is a legal claim a creditor holds against an asset as security for a debt.
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Loan-to-Value (LTV)
a.k.a. LTV ratio
Loan-to-value is the ratio of a loan amount to the appraised value of the collateral securing it, expressed as a percentage.
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Personal Guarantee
a.k.a. PG, personal liability
A personal guarantee is a contractual promise by a business owner to repay a business loan personally if the business defaults.
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Recourse vs Non-Recourse
Recourse factoring requires you to buy back unpaid invoices; non-recourse shifts customer-default risk to the factor.
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Stacking
Stacking is taking on multiple business cash advances or revenue-based advances simultaneously, typically without disclosing them to each funder.
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Subordination
Subordination is an agreement by one lender to rank its lien behind another lender’s lien on the same collateral.
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UCC Filing
a.k.a. UCC-1, financing statement
A UCC filing is a public notice recorded with a state that a lender has a security interest in some or all of a borrower’s business assets.
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UCC-1
A UCC-1 is the specific form used to record a secured party’s lien on business assets with a state Secretary of State.
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