Commercial Lending Glossary

A form of business lending where the asset being purchased (equipment, vehicles, machinery) serves as security for the loan. The lender retains ownership until the loan is fully repaid.

Short-term financing solution used to 'bridge' the gap between the purchase of a new property and the sale of an existing one, or to provide immediate funding while arranging permanent finance.

A type of short-term loan secured by a caveat placed on real estate. Provides quick access to funds based on property equity, typically used for urgent financial needs.

A financial ratio that measures a company's ability to service its debt payments. Calculated by dividing net operating income by total debt service. Lenders typically require DSCR of 1.2 or higher.

Specialized lending for property development projects, including land acquisition, construction costs, and related expenses. Usually structured with progressive draw-downs as milestones are achieved.

The primary mortgage on a property that takes precedence over all other liens or claims. In case of default, the first mortgage holder has first rights to the property.

A legal document that gives a lender a security interest in specified personal property of the borrower to secure repayment of a loan or other obligation.

A promise by one party (guarantor) to assume responsibility for another party's debt obligation if that party defaults. Personal guarantees are commonly required in commercial lending.

A loan period where the borrower pays only the interest on the principal balance, with no principal repayments. Common in development finance and investment property loans.

A form of asset-based lending where businesses can borrow money against the amounts due from customers. Also known as accounts receivable financing or factoring.

A financial ratio that compares the amount of a loan to the value of the asset purchased. Expressed as a percentage, it helps lenders assess lending risk.

A flexible borrowing arrangement that allows a business to draw funds up to a predetermined limit as needed, paying interest only on the amount used.

A hybrid form of financing that combines debt and equity characteristics. Often used to fund expansion or development projects when traditional debt is insufficient.

Financial institutions that provide loans but are not traditional banks. Includes credit unions, peer-to-peer lenders, and specialized finance companies.

A national online register where security interests in personal property can be registered, searched, and verified in Australia.