Plain-English definitions of the SBA and small-business lending terms you’ll run into when researching or applying for financing — from the team at Radix Financial Group, which has facilitated more than 3,500 SBA loans and over $700 million in funding across all 50 states. For deeper guides on any of these topics, see the Learn hub.
Compiled by
Abe Treiger, Founder, Radix Financial Group · Updated 2026-05-08
- SBA (U.S. Small Business Administration)
- The federal agency that supports small businesses, in part by guaranteeing a portion of loans made by approved lenders. The SBA itself does not make most loans; it sets the rules and backs the lender against loss on the guaranteed portion.
- SBA 7(a) loan
- The SBA’s flagship loan program. Loans up to $5 million, used for working capital, debt refinancing, business acquisition, equipment, leasehold improvements, or owner-occupied commercial real estate. Working-capital loans typically amortize over 10 years; real estate up to 25 years. Rates are variable, set as the Prime rate plus a lender margin.
- SBA Express loan
- A streamlined version of the SBA 7(a) program for smaller amounts — generally up to $350,000 through the lenders Radix works with — with an expedited SBA review that allows faster closings (often 3–4 weeks). Terms, uses, and rate structure are otherwise similar to standard 7(a).
- SBA 504 loan
- A long-term, fixed-rate loan for purchasing or refinancing major fixed assets — primarily owner-occupied commercial real estate and heavy equipment. Structured as roughly 50% from a bank, 40% from a Certified Development Company (CDC) via an SBA-backed debenture at a fixed rate, and 10% from the borrower.
- Certified Development Company (CDC)
- A nonprofit chartered by the SBA to administer the 504 loan program in its region. The CDC funds roughly 40% of a 504 project through an SBA-backed debenture, typically at a long-term fixed rate.
- SBA guarantee
- The SBA’s promise to reimburse an approved lender for a portion — typically 75% to 85% — of a loan’s outstanding balance if the borrower defaults. This guarantee lowers the lender’s risk, which is why SBA loans can offer longer terms, lower rates, and smaller down payments than conventional loans.
- SBA guarantee fee
- A one-time fee charged on most SBA 7(a) loans, calculated as a percentage of the guaranteed portion and scaled by loan size. It is typically financed into the loan rather than paid out of pocket. Smaller loans sometimes have it reduced or waived in a given fiscal year.
- Preferred Lender Program (PLP)
- An SBA designation given to experienced lenders, allowing them to approve and underwrite SBA loans without sending each file to the SBA for review. PLP lenders generally close loans faster. Radix works specifically with preferred lenders.
- Working capital
- Funds used for day-to-day business operations — payroll, inventory, rent, marketing, supplies, hiring. Working capital is the most common use of an SBA loan; working-capital SBA 7(a) loans typically amortize over 10 years with monthly payments.
- Debt consolidation / refinancing
- Using a new loan to pay off one or more existing debts, ideally replacing higher-cost, shorter-term debt with a single lower-cost, longer-term loan. An SBA loan can refinance conventional business debt (including high-rate fixed-payment short-term loans) when the refinance benefits the business; a true percentage-of-sales merchant cash advance is not eligible to be refinanced with an SBA loan.
- Merchant cash advance (MCA)
- A funding product in which a company receives a lump sum in exchange for a fixed percentage of its future sales or receivables, repaid through daily or weekly debits whose dollar amount fluctuates with revenue. It is structured as a sale of future receivables, not a loan, and its effective annualized cost frequently exceeds 50%–100%. A true MCA cannot be refinanced with an SBA loan; a fixed-payment short-term loan marketed as an ‘MCA loan’ can be.
- Factor rate
- The pricing convention used by merchant cash advances and some short-term loans, expressed as a multiplier (e.g., 1.30) rather than an interest rate. A 1.30 factor rate on a $50,000 advance means repaying $65,000. Because the repayment window is short, the equivalent annualized cost is far higher than a conventional interest rate.
- Prime rate
- A benchmark interest rate that moves in lockstep with the Federal Reserve’s federal funds rate. Most SBA 7(a) loans are priced as ‘Prime plus a margin,’ so the loan’s rate rises and falls as the Prime rate changes (typically adjusting monthly or quarterly).
- Lender margin (spread)
- The percentage a lender adds on top of the Prime rate to set an SBA 7(a) loan’s rate. The SBA caps the margin, with the cap higher for smaller, shorter loans than for larger, longer ones. The margin is fixed for the life of the loan even though the Prime base changes.
- Amortization
- The schedule by which a loan is repaid in regular installments of principal and interest. A 10-year amortization means the payment is sized so the loan is fully paid off over 10 years. Longer amortization means lower monthly payments for the same loan amount.
- Loan term
- The length of time over which a loan is repaid. SBA 7(a) working-capital and equipment loans run up to 10 years; SBA loans for real estate run up to 25 years. Term and amortization are usually the same on SBA loans (no large balloon payment).
- Prepayment penalty
- A fee charged for paying off a loan early. SBA 7(a) loans with terms under 15 years have no prepayment penalty. Loans with terms of 15 years or more (typically real estate) carry a declining penalty in the first three years: 5% of the prepaid amount in year one, 3% in year two, 1% in year three.
- Personal guarantee
- A commitment by an individual to repay a business loan from personal assets if the business cannot. The SBA requires a personal guarantee from any owner holding 20% or more of the borrowing business.
- UCC filing (UCC-1)
- A public notice a lender files to claim a security interest in a business’s assets. A UCC filing on business assets is standard on virtually all business loans, including SBA loans. It is not the same as a lien on personal real estate.
- Lien
- A legal claim against an asset that secures a debt. SBA lenders take available business collateral and may take a lien on real estate for larger loans; many preferred lenders Radix works with do not require a lien on a personal residence for loans under $500,000, decided case by case.
- Collateral
- Assets pledged to secure a loan. SBA lenders generally take available business collateral and file a UCC on business assets. A lack of full collateral does not automatically disqualify a borrower if cash flow and credit are strong.
- Loan-to-value (LTV)
- The ratio of a loan amount to the appraised value of the property securing it. An SBA 504 loan generally allows up to 90% LTV; an SBA 7(a) real-estate loan through Radix’s lenders can exceed 100% LTV; a non-SBA owner-occupied loan generally allows up to 80% LTV.
- Owner-occupied commercial real estate
- Commercial property in which the borrowing business itself occupies at least 51% of the space — the threshold required for SBA 504 and 7(a) real-estate eligibility. Investment or speculative property does not qualify for SBA financing.
- Debt service coverage ratio (DSCR)
- A measure of whether a business generates enough cash flow to cover its debt payments. A DSCR of 1.25 means the business produces $1.25 of cash for every $1.00 of debt service. Lenders typically want a DSCR comfortably above 1.0; some non-SBA programs require 1.25 or higher.
- Global debt service ratio
- A DSCR that accounts for both the business’s debt and the owner’s personal debt obligations together — a ‘global’ view of repayment capacity. Used by some lenders, particularly on commercial real estate loans.
- Business credit score
- A score reflecting a business’s creditworthiness, sometimes called a small-business risk score or ‘liquid credit.’ Some lenders Radix works with check it with a stated threshold; for Traditional SBA 7(a) through certain lenders, there is no business credit score requirement.
- FICO score
- The most widely used personal credit score, ranging from 300 to 850. The preferred lenders Radix works with generally want a personal FICO of 680 or higher for SBA 7(a) and SBA Express loans; the non-SBA term loan program has a lower threshold (around 660).
- EIDL (Economic Injury Disaster Loan)
- A direct SBA loan program for businesses affected by a declared disaster, including the COVID-19 economic disruption. Having previously borrowed an EIDL does not disqualify a business from obtaining a new SBA 7(a) or SBA Express loan.
- PPP (Paycheck Protection Program)
- A temporary, forgivable-loan program created during the COVID-19 pandemic. Like EIDL, prior PPP borrowing does not disqualify a business from obtaining a new SBA loan.
- Change of ownership
- An SBA-eligible transaction in which one party buys a business, or one owner buys out another’s stake. SBA 7(a) loans are commonly used to fund business acquisitions and partner buyouts, often combining the purchase price with working capital — and real estate, if the business owns its building — in a single loan.
- Loan packaging
- The process of assembling a borrower’s documents and information into a complete file for an SBA lender’s underwriting and SBA submission — tax returns, financial statements, debt schedule, and program-specific items. A marketplace like Radix packages the file and routes it to the lender most likely to approve it.
- Underwriting
- A lender’s analysis of a loan application: cash flow and debt-service coverage, credit, collateral, industry eligibility, and the use of funds. SBA underwriting weighs whether the business can comfortably afford the new payment heavily — often more than the credit score itself.
Radix Financial Group is a marketplace that helps established business owners obtain SBA 7(a) and other financing through a nationwide network of preferred lenders; Radix is not a lender and does not participate in the SBA 7(a) program directly. Definitions are simplified for general understanding and reflect, where program terms are mentioned, the offerings of the specific lenders Radix works with; they are not a general statement of SBA guidelines and are not financial, legal, or tax advice.
