Financing glossary
The terms that appear in a financing agreement, defined by what they mean for you rather than by what a dictionary says.
How to use this
Financing documents are written in a vocabulary most people meet only once or twice in a lifetime. These are the 25 terms that actually change what you pay or what you are allowed to do — defined in plain language, with the practical consequence rather than the dictionary definition.
A–Z
Glossary of financing terms
- Adverse action notice
- A notice a provider must send when it declines an application wholly or partly because of information in a consumer report. It names the credit reporting agency, states the principal reasons and explains your right to a free copy of that report within 60 days.
- Amortisation
- The way a loan payment is split between interest and principal over its term. Early payments are mostly interest; later ones mostly principal.
- Annual percentage rate (APR)
- The yearly cost of credit expressed as a rate, required on loans by the Truth in Lending Act. A lease-purchase agreement has no APR because it is not credit.
- Buyout
- Paying a lease-purchase agreement off early to take ownership. Inside the same-as-cash window it usually costs close to the cash price; outside it, more.
- Credit tier
- A band providers use to price risk, typically Tier 1 for established credit down to Tier 3 or 4 for challenged or no credit. Tier boundaries are where rates change most sharply.
- Debt-to-income ratio
- Your monthly debt payments divided by your gross monthly income. A strong score with a high ratio is still regularly declined.
- Fair market value (FMV) lease
- An equipment lease with a lower monthly payment and a purchase payment due at the end based on the equipment's value then. Compare with a $1 buyout.
- $1 buyout
- An equipment lease where you own the equipment at the end for a nominal payment. Higher monthly cost than FMV, lower total cost if you intend to keep the machine.
- Furnisher
- A lender, lessor or other business that supplies account information to the credit bureaus. You can dispute an error with the furnisher as well as with the bureau.
- Hard inquiry
- A credit check tied to a formal application. Visible to other lenders, stays on your report about two years, and can lower your score slightly.
- Lease-purchase agreement
- A lease with an option to buy, governed by state rental-purchase law rather than federal lending law. The lessor owns the item until you complete payments or exercise a buyout.
- Lender waterfall
- Routing one application through a ranked sequence of providers, cheapest first, until one is willing to make an offer. The mechanism behind multi-lender platforms.
- Lessor
- The company that owns the item under a lease-purchase agreement and collects the payments. On this platform, the lessor is the provider named on your agreement, not us.
- Payment solution provider
- The lender or lessor that reviews your application and, if it approves, writes the contract and services the account.
- Prepayment penalty
- A fee for paying a loan off early. Programs in this network generally do not carry one — confirm it in your agreement.
- Rental-purchase statute
- The state law governing lease-purchase agreements: disclosures, permissible fees, reinstatement rights after a missed payment and early purchase pricing. It is why availability and terms differ by state.
- Reinstatement
- The right under most state rental-purchase laws to restore a lease after a missed payment, within a set period, without losing what you have already paid.
- Residual
- The purchase amount due at the end of a fair market value lease, reflecting the equipment's estimated value at that point.
- Same as cash
- A window — commonly 30 days, or 90 to 101 days — in which you can buy the item outright for close to the cash price instead of continuing to the full total of payments.
- Section 179
- A US tax provision letting a business deduct the cost of qualifying equipment in the year it is placed in service rather than depreciating it. Speak to your accountant before relying on it.
- Soft inquiry
- A look at your credit file that does not affect your score and is not visible to other lenders. Routing an application here begins with one.
- Spending limit
- The amount an approval entitles you to spend, valid for 30 days, usable across one or more merchants.
- Total of payments
- What a lease-purchase agreement costs in full to own the item. The lease equivalent of an APR, expressed in dollars. Run to term it commonly lands between 1.8 and 2.3 times the cash price.
- Truth in Lending Act (TILA)
- The federal law requiring lenders to disclose the cost of credit, including the APR. It applies to loans, not to lease-purchase agreements.
- Working capital
- Financing for operating needs rather than a specific asset — inventory, payroll, seasonal cash flow or expansion. SBA loans, term loans and revolving credit lines.
Still unsure about a term in your agreement?
Call before you sign, not after. A US-based team answers seven days a week.