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# The credit glossary: the formal terms and the slang
- URL: https://blog.heygrand.com/the-credit-glossary-the-formal-terms-and-the-slang/
- Published: 2026-08-13T19:20:53.000Z
- Updated: 2026-08-13T19:20:53.000Z
- Author: Kirk Donohoe

Credit has two vocabularies: the one in the contract and the one on the phone. This glossary covers both — the formal terms you'll meet in credit reports, loan documents and insolvency notices, and the language credit teams actually speak. Slang entries are marked *(slang)*. UK usage throughout; where a legal process belongs to one part of the UK — England and Wales, Scotland or Northern Ireland — the entry says so.

---

## Trading on credit: the basics

**Trade credit** — Buying goods or services now and paying later, on agreed terms. The biggest source of short-term business finance in the UK — larger than bank lending — and mostly extended by suppliers, not banks.

**Trade account / credit account** — An account with a supplier that lets a business buy on credit terms instead of paying upfront. "Opening an account" is the moment a supplier becomes a lender.

**Credit limit** — The most a supplier or lender will let one customer owe at any one time.

**Payment terms / credit terms** — How long the buyer has to pay, and on what conditions. See "Net 30" and "EOM" below.

**Open account** — Trading where goods ship before payment on the strength of the relationship, rather than through a payment instrument like a letter of credit. Most trade credit works this way. Open account doesn't have to mean unprotected — retention of title, guarantees and credit insurance can all sit behind it.

**Accounts receivable (AR) / trade debtors** — Money customers owe the business. "Receivables" in a lender's mouth, "debtors" in an accountant's, "the ledger" in a credit office.

**Accounts payable (AP) / trade creditors** — Money the business owes its suppliers. Your receivables are someone else's payables.

**Creditworthiness** — The likelihood that a customer can and will meet its obligations. Two different questions — ability and willingness — hiding in one word.

**Credit risk** — The risk of loss caused by a customer failing to pay as agreed.

**Credit policy** — The written rules governing applications, limits, reviews, stops and collections. The difference between a credit function and a series of individual opinions.

**Credit assessment / credit decision** — The evidence-gathering, and the approve, decline or approve-with-conditions that comes out of it.

**Credit application** — The form a business fills in to ask for a trade account. Usually asks for company details, bank details and trade references.

**Trade references** — Other suppliers vouching that a business pays on time. Worth knowing: a business picks its own referees, so it picks the suppliers it pays best.

**Credit control** — The function that decides who gets credit, how much, and then makes sure the money comes in.

**Credit controller / credit manager** — The people who run credit control. The controller chases the money; the manager sets the policy. In small firms it's the same person, often also doing three other jobs.

**Exposure** — Everything at risk with one customer right now: unpaid invoices, plus goods ordered but not yet invoiced, plus anything in transit. Exposure builds after the decision — it's usually highest long after the credit check that approved it.

**Group exposure / aggregate exposure** — Total risk across connected companies, branches or accounts. Three healthy-looking limits to three subsidiaries can be one dangerous exposure to a single group.

**Credit appetite / risk appetite** — How much risk a lender or supplier is willing to take on, and with whom. Appetite changes with the economy; limits should change with it.

**Overtrading** — Growing sales faster than your cash can support. One of the few ways a profitable business goes bust.

---

## Payment terms and invoicing

**Net 30 / net terms** — Payment due 30 days from the invoice date. Net 60 and net 90 work the same way.

**EOM (end of month)** — "30 days EOM" means payment is due 30 days after the end of the month the invoice was raised in. An invoice dated 2 June on 30 days EOM isn't due until 30 July.

**Pro forma invoice** — A preliminary document inviting payment before goods are supplied. Not a VAT invoice — the proper invoice follows payment or supply, and only that one supports a VAT reclaim. *(slang use: "put them on pro forma" — a credit team's way of withdrawing credit without closing the account.)*

**Cash in advance (CIA) / cash with order (CWO) / cash on delivery (COD)** — The no-credit options: pay before, pay when ordering, pay at the door.

**Early settlement discount** — A discount for paying early, written like "2/10 net 30": 2% off if you pay within 10 days, full amount due in 30.

**Purchase order (PO)** — The buyer's formal instruction to supply. "No PO, no pay" *(slang)* — many large firms won't pay an invoice that doesn't quote a PO number, however good the goods were.

**Invoice** — The formal request for payment. The clock on payment terms usually starts here.

**Credit note ("CN")** — A document reducing what's owed, issued for returns, errors or disputes.

**Debit note / deduction / chargeback** — The buyer's version: a reduction or claim it raises against an invoice for shortages, damage, returns or agreed rebates. Often taken first and explained later.

**Statement (of account)** — A monthly summary of everything a customer owes across all invoices. Many businesses pay from the statement, not the invoice.

**Remittance advice** — The buyer's note saying which invoices a payment covers. Without it, cash lands unallocated and the ledger turns to guesswork.

**Self-billing** — The buyer raises the invoice on the supplier's behalf. Common in haulage, construction and publishing.

**Retention (construction)** — Money the customer holds back — typically 5% — until the work is proven sound. Often the last cash a subcontractor ever sees from a job.

**Application for payment** — In construction, the contractor's valuation of work done to date, submitted for approval before an invoice or payment notice follows.

**Pay-when-paid** — A clause saying "we'll pay you when our customer pays us." Unenforceable in UK construction contracts since the Construction Act 1996, with one exception: insolvency further up the chain.

**Stage payments / milestone billing** — Payment in agreed chunks as work progresses, rather than one bill at the end.

---

## Running the account: the day-to-day

**Outstanding balance** — Everything a customer currently owes, whether due yet or not.

**Current / not yet due** — Invoiced debt still within terms. Nothing wrong with it — yet.

**Overdue / past due** — Debt unpaid after its due date. Where credit control earns its living.

**Order-to-cash (O2C)** — The whole process from accepting an order to allocating the payment: check, order, delivery, invoice, chase, cash, allocation. Credit control is the risk brain inside it.

**Credit utilisation / headroom / available credit** — How much of a limit is in use, and what remains. A customer at 95% of limit with orders pending is a decision waiting to happen.

**Held order** — An order blocked pending credit approval — the account is over limit, overdue or flagged. **Order release** — letting it through.

**Temporary limit / limit uplift** — A short-lived increase to a credit limit, usually for a specific order or a seasonal peak. The danger is the word "temporary."

**Watchlist / early-warning signal** — Customers getting closer attention because something has changed: payments slowing, a director gone, cover pulled, a court claim filed. The watchlist is monitoring made visible.

**Cash allocation** — Matching money received to the invoices it pays. **Unapplied cash** — money received but not yet matched to anything.

**Payment on account** — Money received with no instruction about which invoices it settles. Better than nothing; messier than it sounds once a dispute arrives.

**Payment plan / time to pay** — An agreed schedule for clearing overdue debt. "Time to pay" is also HMRC's name for its own version.

**Full and final settlement** — Accepting a reduced payment in complete satisfaction of a debt. Get the wording exactly right — the words are the deal.

**Collections vs recoveries** — Collections is routine chasing on live accounts; recoveries is working distressed, defaulted or written-off debt. Different skills, different phone manner.

**Expected credit loss (ECL)** — The accounting estimate of future losses on receivables, required under IFRS 9\. Provisioning for the loss before it happens, not after.

**Recovery** — Money collected against a debt already defaulted or written off. In the accounts, a pleasant surprise.

---

## The slang of the credit office

**On stop** *(slang)* — No more orders until the account is paid. The credit controller's most powerful lever. "They've put us on stop" is a sentence that stops sites, vans and production lines.

**Stop list** *(slang)* — The list of accounts currently on stop. In some businesses it's printed and pinned up; in most it's the first thing sales complain about.

**Off stop** *(slang)* — Released to trade again, usually after payment or a promise worth believing.

**On hold** *(slang)* — Softer than on stop: orders pause while a query or an overdue balance gets sorted.

**Over limit** *(slang)* — The account has hit its credit limit and new orders need a decision, not a process.

**Slow payer** — A customer who always pays — eventually. Distinct from a bad debt, but slow payers are where bad debts come from.

**Stretching** *(slang)* — Deliberately paying suppliers late to fund your own cash flow. "They're stretching us to 90 days." Free finance for the buyer; a loan the supplier never agreed to make.

**Short pay** *(slang)* — Paying less than the invoice amount, usually with a deduction the supplier finds out about afterwards.

**Knocking an invoice** *(slang)* — Disputing it, sometimes fairly, often to buy time. A rush of queries from one customer just before month-end is rarely about quality.

**Query / disputed invoice** — The formal version of a knock. An invoice that won't be paid until the dispute is resolved — and the terms clock often stops with it.

**"The cheque's in the post"** *(slang)* — The classic stall. Modern variants: "it's with accounts", "the person who does payments is on holiday", "we've had a problem with the bank."

**Promise to pay** — A commitment to pay by a specific date, logged by the credit controller. A **broken promise** is the signal that matters — once promises stop meaning anything, the account has changed character.

**Won't pay vs can't pay** — The first question in collections. Won't-pays respond to pressure; can't-pays don't, because the money isn't there. Treating one like the other wastes time or destroys a customer.

**Paying on the drip** *(slang)* — Clearing a debt in small instalments. Sometimes agreed, sometimes just what turns up.

**Gone away** — Disappeared: mail returned, phones dead, premises empty. Triggers a trace.

**Done a runner** *(slang)* — Gone away, with intent.

**Gone bust / gone under / gone pop / folded** *(slang)* — Insolvent. Every credit office has its own preferred verb.

**Phoenixing** *(slang)* — A company fails owing its creditors, and the same directors start a near-identical business — often from the same premises, sometimes with a near-identical name — free of the old debts. Legal in some forms, notorious in all of them.

**Fresh-air invoice** *(slang)* — An invoice for goods or services that don't exist, usually raised to draw money from an invoice finance facility. Fraud, and one of the oldest kinds.

**Teeming and lading** — Using today's customer receipts to cover yesterday's hole in the ledger, endlessly rolled forward. An old bookkeeping fraud that surfaces when the person running it takes a holiday.

**Aged debt / the ageing** — Unpaid invoices grouped by how old they are: current, 30, 60, 90+ days. The ageing report is the credit office's daily weather map.

**Sales ledger** — Everything customers owe you. **Purchase ledger** — everything you owe suppliers. "The ledger" usually means the sales ledger.

**Debtor days / DSO (days sales outstanding)** — The average number of days it takes to get paid. The single most-watched number in credit control.

**Creditor days** — The average time a business takes to pay its own suppliers. Read alongside debtor days, it shows who is funding whom.

**Bad debt** — Money owed that won't be collected. A **write-off** is the accounting admission of it.

**On tick** *(slang, older)* — On credit. "They've been buying on tick for years."

**Contra / set-off** — Offsetting what you owe a business against what it owes you and settling the difference. "We'll do a contra" *(slang)*.

**Take a view** *(slang)* — Override the normal rule after weighing the circumstances. "The score says no, but we'll take a view." Half of credit management lives inside this phrase.

**Good for it** *(slang)* — Believed able to pay — often on less evidence than the speaker implies. "They're good for it" has preceded a lot of bad debt.

**Release the order** *(slang)* — Let a credit-held order through. The daily tug-of-war between sales and credit, settled one order at a time.

**Trade the balance down / work it down** *(slang)* — Keep supplying selectively while shrinking the total exposure — enough to keep the customer trading, never enough to grow the debt.

**Pull the terms** *(slang)* — Withdraw credit and require payment upfront. See "put them on pro forma."

**Reduce the line** *(slang)* — Cut the credit limit.

**Clean account** *(slang)* — Nothing overdue, nothing disputed, nothing unallocated. Rarer than it should be.

**Paying to terms** — Paying by the contractual due date. The baseline that days-beyond-terms measures slippage from.

**Name risk** *(slang)* — Extending credit mainly because the customer is famous or looks substantial. Carillion was a name.

**Robbing Peter to pay Paul** *(slang)* — Paying one creditor with money withheld from another. From the outside it looks like slow payment; from the inside it's triage.

**Long-firm fraud** — Building a convincing payment record over months, then ordering heavily on credit and disappearing. Patient, professional, and aimed squarely at trade credit.

**Bust-out** *(slang)* — The end move: rapidly drawing down every available facility and supplier limit just before failure or disappearance. The long firm's final act — though it also happens at legitimate businesses that can see the end coming.

---

## Chasing payment: collections and enforcement

**Dunning** — The sequence of chase letters and emails sent as an invoice ages. From an old word meaning to demand payment persistently.

**Chasers** *(slang)* — The calls and emails themselves. "I've sent three chasers."

**Letter before action (LBA)** — The formal warning that court proceedings follow if payment doesn't. Also called a "seven-day letter" *(slang)* after the usual deadline.

**Statutory interest** — Under the Late Payment of Commercial Debts (Interest) Act 1998, a business can charge 8% over the Bank of England base rate on late commercial payments, plus fixed compensation per invoice: £40 (debts under £1,000), £70 (£1,000 to £9,999.99) or £100 (£10,000 and over). Rarely charged, mostly because suppliers fear losing the customer.

**Fair Payment Code** — The voluntary UK code run by the Small Business Commissioner, which replaced the old Prompt Payment Code in December 2024\. Signatories earn Bronze, Silver or Gold awards against payment-speed criteria — Gold means paying 95% of all invoices within 30 days; Bronze, within 60.

**Payment practices reporting** — The legal duty on large UK companies to publish, twice a year, how quickly they actually pay suppliers. Public data, and worth reading before you extend terms to a big name.

**Debt collection agency (DCA)** — A third party that chases debts for a fee or a percentage. "Passing it to collections" usually means it has left the relationship stage.

**Tracing** — Finding a debtor who has gone away. Done by trace agents using public records, credit data and shoe leather.

**Money claim / county court claim** — Suing for the debt. For most trade debts this is the small-print threat behind the LBA.

**County court judgment (CCJ)** *(England and Wales)* — A court ruling that the debt is owed. It sits on the public register for six years, marked "satisfied" once paid — unless paid within one month of the judgment, in which case it's removed entirely. For credit teams, a fresh CCJ against a customer is one of the loudest warning signals there is. Scotland's equivalent is a **decree**; Northern Ireland's courts issue their own judgments.

**Enforcement** — Making a judgment actually produce money: bailiffs, High Court Enforcement Officers ("sending in the sheriffs" *(slang)*), attachment of earnings, charging orders.

**Statutory demand** — A formal written demand for a debt. If a company owing more than £750 doesn't pay or dispute it within 21 days, the creditor can petition to wind the company up. Only for undisputed debts — courts penalise creditors who use it to pressure a debt that's genuinely in dispute. The nuclear escalation.

**Winding-up petition** — Asking the court to put a company into compulsory liquidation over unpaid debt. "We're winding them up" *(slang)*. Banks freeze accounts when one is advertised, so the threat alone often produces payment.

**Personal guarantee (PG)** — A director personally promises to cover the company's debt if the company can't. "Did we get a PG?" is often the first question when an account fails.

**Retention of title (ROT / Romalpa clause)** — A contract term saying goods remain the supplier's property until paid for. If the customer fails, you can — in principle — take your goods back, if you can find them, identify them, and they haven't been built into something else.

---

## Security: what stands behind the credit

Personal guarantees, retention of title and debentures — the ones credit teams use most — are in the collections section above.

**Parent-company guarantee** — The customer's parent company promises to pay if the subsidiary doesn't. Worth exactly as much as the parent, so check the parent as carefully as the customer.

**Bank guarantee** — A bank's promise to pay on demand if the customer fails to. Strong, and priced like it.

**Letter of credit** — A bank undertakes to pay the seller once shipping documents match agreed terms. The classic instrument of international trade, built for deals where neither side trusts the other's courts.

**Charge** — A legal claim over an asset as security for a debt. **Collateral** — the asset itself.

**Negative pledge** — A borrower's promise not to grant security over its assets to anyone else. It protects a lender's place in the queue by keeping others out of it.

---

## Credit fraud

The classics — fresh-air invoices, long-firm fraud, the bust-out — are in the slang section, where they were named.

**Application fraud** — Lying on the way in: false financials, invented trade references, misstated directors.

**Impersonation (of a business)** — Posing as a real, creditworthy company — its name, its letterhead, sometimes its premises — to obtain goods on its reputation. The genuine business finds out when the invoice arrives.

**First-party fraud** — The customer is exactly who they say they are; they just never intended to pay.

**Shell company** — A company with no real trade behind it, used to obtain credit or move money.

**Dormant-company hijack** — Taking over a long-registered, inactive company and using its respectable age and clean history to pass credit checks. Age is one of the things scores reward, and fraudsters know it.

---

## When a business fails: insolvency terms

**Insolvent** — Unable to pay debts as they fall due (the cash-flow test), or owing more than the business owns (the balance-sheet test). A company can be profitable and insolvent at the same time — cash decides.

**Administration** — A rescue procedure. An insolvency practitioner takes over to save the business or get a better result for creditors than immediate liquidation. Comes with a moratorium that freezes creditor action.

**Liquidation** — The end: assets sold, proceeds shared out, company dissolved. A **CVL** (creditors' voluntary liquidation) is started by the directors; **compulsory liquidation** is forced by a creditor through the court.

**Company voluntary arrangement (CVA)** — A deal where creditors agree to accept reduced or rescheduled payments while the company trades on. Needs approval by 75% by value of the creditors who vote — and it fails if more than half by value of the unconnected creditors voting are against it.

**Pre-pack** — An administration where the sale of the business is arranged before the appointment is announced — often to the existing management. Creditors find out after it's done, which is exactly why the term has a reputation.

**Receivership** — A secured lender's appointee takes control of charged assets. Largely historic for companies now, but the word survives in conversation.

**Secured creditor** — Holds a charge over assets and gets paid from them first. **Unsecured creditor** — everyone else, including almost all trade suppliers, paid from what's left. Usually pennies.

**Preferential creditor** — Jumps part of the queue: employees for certain claims and, since December 2020, HMRC for VAT and PAYE the company collected. Every pound HMRC takes back is a pound unsecured suppliers don't get.

**Debenture** — The document giving a lender a charge over company assets — **fixed charges** on specific assets, a **floating charge** over everything else that shifts (stock, debtors).

**Dividend (insolvency)** — What unsecured creditors eventually receive, quoted in pence in the pound. "We got 3p in the pound" needs no further explanation.

**Proof of debt** — The form a creditor files to claim in an insolvency. No proof, no dividend.

**Insolvency practitioner (IP)** — The licensed professional who runs administrations, liquidations and voluntary arrangements.

**Official receiver** — The government officer who handles compulsory liquidations and bankruptcies where no insolvency practitioner is appointed.

**Moratorium** — A legal freeze on creditor action while a rescue is attempted. Automatic in administration; also available as a standalone breathing space for companies.

**Creditor waterfall** — The strict order of payment in insolvency: secured creditors first, then preferential, then unsecured, then shareholders. Trade suppliers stand near the bottom.

**Prescribed part** — A slice of floating-charge money set aside by law for unsecured creditors, capped at £800,000\. Often the only reason unsecured creditors see anything at all.

**Preference** — Paying one creditor ahead of the others shortly before insolvency. Liquidators can claw it back.

**Transaction at undervalue** — Selling or giving away assets for less than they're worth in the run-up to insolvency. Also reversible.

**Restructuring plan** — A court-supervised rescue tool, introduced in 2020, that can bind dissenting classes of creditors — the "cross-class cram-down." Mostly used by large companies.

**Strike-off / dissolution** — Removal from the Companies House register. Sometimes the quiet end of a company that owed people money; creditors can object, and can restore a dissolved company to pursue it.

**Individual voluntary arrangement (IVA)** — The personal equivalent of a CVA: a legally binding deal for an individual to repay part of their debts over time, typically five to six years.

**Bankruptcy** — The formal insolvency process for individuals in England, Wales and Northern Ireland. Usually discharged after 12 months, though the credit record damage lasts six years.

**Sequestration** — Bankruptcy under Scottish law. Same fate, different word.

---

## Credit checking and bureau terms

**Credit reference agency (CRA) / credit bureau** — A company that collects data on borrowers and businesses and sells reports and scores. Experian, Equifax and TransUnion dominate consumer data in the UK; Experian, Dun & Bradstreet and Creditsafe are among the big names on the business side.

**Credit report / credit file** — Everything the bureau holds on a person or business: identity, accounts, payment history, public records like CCJs and insolvencies.

**Credit score** — A number summarising the file. Useful shorthand, but remember what it is: a score is an answer without an explanation.

**Credit rating** — The banded version — often letters or colour bands — of the same judgement.

**Failure score** — A business score predicting the likelihood of insolvency within the next 12 months. What most "business credit scores" actually measure.

**Credit limit recommendation** — The bureau's suggested maximum exposure to a business. A starting point, not a decision.

**Risk band / score band** — Grouping scores into categories (low risk, above average risk, and so on) so humans can act on them.

**Soft search** — A credit check that doesn't leave a mark other lenders can see. Used for quotes and eligibility checks. **Hard search** — a full check recorded on the file; too many in a short period is itself read as a warning sign. The mark left is called a **footprint**.

**Trade payment data / payment performance data** — Records of how a business actually pays its suppliers, contributed to bureaus by other suppliers. The closest thing to the truth about behaviour, rather than accounts.

**Days beyond terms (DBT)** — The average number of days a business pays past its agreed terms. A business on 30-day terms with a DBT of 22 is really a 52-day payer.

**Adverse data** — The bad stuff: CCJs, defaults, insolvency notices, missed payments.

**Default (credit file)** — A formal record that a credit agreement broke down. On a consumer file it stays for six years from the default date.

**Notice of correction** — A short statement a consumer can add to their file explaining a past problem. Lenders must read it — humans, at least, do.

**Filed accounts** — The financial statements a company files at Companies House. For small companies these can be nearly a year old on arrival and disclose very little — which is why bureau scores on small businesses lean so heavily on so few numbers.

**Micro-entity / abridged accounts** — The minimal filing options small companies can choose. A balance sheet, little else, and the reason "check their accounts" often answers nothing.

**Director search** — Checking a company's directors: other current and past directorships, failures, disqualifications. Businesses fail; directors repeat.

**PSC / UBO** — Person with significant control / ultimate beneficial owner: the human being who actually owns or controls the company, however many layers sit in between.

**KYC / KYB** — Know your customer / know your business: the identity checks done at onboarding. **AML** — anti-money-laundering, the rules requiring them.

**CIFAS marker** — A record in the UK's cross-industry fraud-prevention database. Not all markers mean wrongdoing: some record suspected fraud, others mark victims of impersonation, and Protective Registration is a flag people place on their own identity after a data breach. A CIFAS record explains many otherwise mysterious declines — and doesn't automatically mean the person committed fraud.

**Thin file** — Too little credit history to score well. **Credit invisible** — no meaningful file at all. Common among the young, the recently arrived, and businesses that always paid cash.

**Onboarding** — Everything done when taking on a new customer: identity, fraud, credit. The most-checked moment in the relationship — and for many firms, the last time anyone looks.

**Monitoring / alerts** — Watching customers continuously for changes — new CCJs, filed accounts, director changes, worsening payment behaviour — instead of waiting for the next review to find out.

**Annual review** — Re-checking a customer once a year. An annual review is a calendar reminder, not a monitoring system.

---

## Reading the accounts

**Net worth** — Assets minus liabilities: what the shareholders would own if everything were settled today. **Tangible net worth** strips out intangibles like goodwill — the version credit analysts trust.

**Current ratio / liquidity** — Current assets divided by current liabilities: can the business cover what's due soon with what it can turn into cash soon?

**Gearing / leverage** — How much of the business is funded by debt rather than its own money. Highly geared businesses amplify both good years and bad ones.

**Cash-flow forecast** — The forward view of money in and out. Businesses fail on cash, not profit, so this is the document that predicts survival.

**Going-concern warning** — A note in the accounts flagging material doubt that the business can survive the next 12 months. As loud as a set of accounts ever gets.

**Qualified audit opinion** — The auditor signing off with reservations. Read the reservation.

---

## Business lending and finance

**Working capital** — Formally: current assets minus current liabilities. The cash needed to fund the gap between paying for stock and wages and getting paid by customers is strictly the **working-capital requirement** (or cash-conversion gap) — and most short-term borrowing exists to bridge exactly that.

**Overdraft** — Borrowing through the current account, repayable on demand. Flexible, and withdrawable at the worst possible moment.

**Term loan** — A lump sum repaid over a fixed period. A **facility** is the agreed pot; a **drawdown** is taking money from it.

**Revolving credit facility (RCF)** — A pot the borrower can draw, repay and draw again. An overdraft with a contract and a fixed term.

**Principal** — The amount borrowed, as distinct from the interest on it.

**Maturity / tenor** — When the loan must be repaid, and how long it runs.

**Margin** — What the lender charges above the reference rate. In "SONIA plus 3%", the 3% is the margin.

**SONIA** — The Sterling Overnight Index Average: the benchmark rate that replaced LIBOR for sterling lending.

**Amortisation** — Repaying principal gradually over the life of the loan. A **bullet repayment** clears it all at maturity; a **balloon** is a small schedule with a large final payment.

**Covenant** — A promise attached to a loan — keep debt below a level, file information on time. Breach one and the lender can act, even if payments are current.

**Secured lending** — Backed by assets the lender can take. **Unsecured** — backed by the promise alone, priced accordingly.

**Invoice finance** — Borrowing against unpaid invoices. The umbrella term for factoring and invoice discounting.

**Factoring** — The finance company advances money against your invoices and collects them from your customers itself. Customers know.

**Invoice discounting** — Same advance, but you keep collecting and customers usually never know. "CID" — confidential invoice discounting.

**Selective / spot factoring** — Financing single invoices as needed rather than the whole ledger.

**Debtor book** — All the money owed to a business by its customers; the asset invoice finance lends against. "Lending against the book" *(slang)*.

**Advance rate / availability** — The percentage of invoice value the lender will advance (often 80–90%), and how much headroom is left to draw today.

**Concentration limit** — A cap on how much of the funded ledger one customer can represent. Protection against a business that lives or dies on a single payer.

**Recourse / non-recourse** — Whether unpaid invoices come back to you (recourse) or the funder wears the loss (non-recourse). Non-recourse is narrower than it sounds: protection normally covers specified risks on approved customers and eligible invoices, not every kind of non-payment.

**Asset-based lending (ABL)** — Lending against a package of assets — debtors, stock, plant, property — rather than just invoices.

**Asset finance / hire purchase / leasing** — Funding equipment and vehicles by paying for them over their working life. Under **HP** you own the asset at the end; under a lease you may not.

**Merchant cash advance (MCA)** — An advance repaid automatically as a slice of daily card takings. Popular in hospitality and retail; the effective cost is often far higher than it looks.

**Revenue-based finance** — Lending repaid as a percentage of revenue, sized on trading data rather than accounts.

**B2B BNPL (buy now, pay later)** — Trade credit rebuilt as a fintech product: instant credit terms at a business checkout, with a third party underwriting and often insuring the risk.

**Embedded finance** — Credit or payments built into someone else's product — the builders' merchant's checkout offering 60-day terms is embedded finance in work boots.

**Supply chain finance / reverse factoring** — A big buyer's bank pays its suppliers early at a small discount, and collects from the buyer on the full terms. Cheap money for suppliers — until the programme is withdrawn.

**Dynamic discounting** — The buyer pays early from its own cash in exchange for a sliding discount. Same effect as supply chain finance, different funder.

**Trade credit insurance** — Insurance that pays out when a customer fails owing you money. Insurers set a **credit limit** per customer and can cut it mid-relationship — "they've pulled cover" *(slang)* is a sentence that reprices a whole trading relationship overnight, and often signals trouble before the market sees it.

**Discretionary limit** — Under a credit insurance policy, the amount you can self-underwrite on a customer without the insurer's named approval, provided you've done the checks the policy requires.

**Protracted default** — The insurance trigger that isn't insolvency: the customer simply hasn't paid for a defined period past due.

**Indemnity percentage** — The share of an insured loss the insurer actually pays — typically around 90%. The rest stays with you, so you keep caring.

**Waiting period** — How long you must wait after the loss event before a claim pays out.

**Overdue declaration** — The policy duty to report accounts overdue beyond a set point. Miss it and the claim can fail.

**Excess / top-up cover** — The uninsured first slice of a loss, and extra cover bought above the primary insurer's limit on a customer.

**Bridging loan** — Short-term, expensive lending to cover a gap — usually until a property sale or refinance completes.

**APR** — Annual percentage rate: the yearly cost of borrowing including charges. Designed for comparison; routinely misread on short-term products, where a modest-sounding fee becomes a triple-digit APR.

**Base rate** — The Bank of England's official interest rate, the floor most lending is priced from.

**Loan-to-value (LTV)** — The loan as a percentage of the asset's value. The lender's cushion, in one number.

**Arrears** — Behind on payments. The account still lives; the clock is ticking.

**Default (lending)** — The formal breakdown of the agreement — the point where the lender stops expecting normal payments and starts recovering.

**Forbearance** — The lender easing terms — payment holidays, extended schedules — to help a struggling borrower through. Kindness, regulation and loss-avoidance in one word.

**Non-performing loan (NPL)** — A loan no longer being repaid as agreed. Books of them get sold at a discount to specialists.

**Provision / impairment** — Money a lender sets aside now for the losses it expects later. Watch provisions rise and you're watching a lender's honest opinion of its own book.

**Underwriting** — Deciding whether to take a risk, and on what terms. The craft the whole industry sits on.

**Affordability** — Whether the borrower can actually sustain the repayments — a different question from whether they'll be approved.

**Open banking** — Sharing live bank transaction data, with permission, so a lender can see actual cash flow instead of year-old accounts.

**Prime / near-prime / sub-prime** — Borrower quality bands, from cleanest history to riskiest. Where you sit sets what you pay.

**Alternative lender** — Any non-bank lender: fintechs, specialist funds, invoice financiers. Increasingly the first stop for small business credit, not the alternative.

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## Consumer credit terms

**Credit score (consumer)** — Each agency scores on its own scale, so "my score is 700" means nothing without knowing whose 700\. Lenders use their own internal scores anyway.

**Electoral roll** — Being registered to vote at your address. One of the simplest things on a UK consumer file, and its absence quietly costs points.

**Credit utilisation** — How much of your available credit you're using. Maxed-out cards *("maxed out" — slang)* read as stress even when payments are perfect.

**Minimum payment** — The smallest amount a card issuer will accept each month. Designed to keep the debt alive; paying only the minimum can stretch a balance over decades.

**Persistent debt** — The regulatory definition of that trap: paying more in interest and charges than principal over 18 months, which forces the card issuer to intervene.

**0% balance transfer** — Moving card debt to a new card with an interest-free promotional window, for a fee. Works if the debt is cleared before the window closes; re-prices brutally if not.

**Section 75** — Consumer Credit Act protection: pay by credit card for something costing over £100 and up to £30,000, and the card issuer is jointly liable with the seller if things go wrong.

**Default notice** — The formal warning a consumer lender must send before terminating an agreement or reporting a default.

**Financial association** — A link on your file to another person, usually from a joint account or joint application, whose credit behaviour can then influence how lenders see you.

**Arrangement to pay (AP marker)** — A file marker showing reduced payments agreed with a lender. Softer than a default, but lenders still read it as trouble.

**Settled / satisfied / partially settled** — How closed items read on a file: settled (paid and closed), satisfied (a judgment paid after the event), partially settled (the lender accepted less than was owed — and the file says so for six years).

**Representative APR** — The advertised rate that only 51% of accepted applicants must actually receive. The other 49% find out their real rate after the search.

**Guarantor loan** — A loan where a friend or family member promises to pay if the borrower doesn't. The guarantor often doesn't understand this until the letter arrives.

**Payday loan** — Small, short, expensive. Now price-capped by the FCA after the sector's excesses; the caps arrived only after the harm did.

**Logbook loan** — Borrowing secured on your car, which the lender can seize without a court order. One of the last survivals of Victorian bills-of-sale law.

**Doorstep lending / home credit** — Small cash loans issued and collected at the borrower's home. A shrinking, heavily regulated corner of the market.

**Loan shark** — An unlicensed, illegal lender. No paperwork, no FCA, no limit on what collection looks like. The debt isn't legally enforceable — the fear is the enforcement.

**Credit builder card** — A low-limit, high-rate card for people with thin or damaged files, used to demonstrate steady payment and rebuild a score.

**Debt management plan (DMP)** — An informal arrangement, usually via a debt charity, to repay debts at an affordable rate. No legal protection, but lenders generally cooperate.

**Debt relief order (DRO)** *(England, Wales and Northern Ireland)* — A low-cost route to writing off debts for people with low income, minimal assets and debts under £50,000\. A quieter alternative to bankruptcy.

**Breathing space** *(England and Wales)* — A statutory scheme giving someone in problem debt 60 days of frozen interest and paused enforcement while they get advice. Scotland's equivalent is the **statutory moratorium** under its Debt Arrangement Scheme.

**On the never-never** *(slang)* — Buying on instalments, usually hire purchase. "They got the sofa on the never-never." Older generation's phrase; BNPL is the same idea with an app.

**On tick** *(slang)* — See the credit office section: on credit. Used for corner-shop credit long before anyone scored it.

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## Grand's own vocabulary

A few terms we use at Grand that you'll see across our writing.

**Exposure** — Everything at risk with a customer after you've said yes. The core observation: exposure builds after the decision, while the information behind the decision gets stale.

**Visibility between checks** — What you can see of a customer between one credit check and the next. For most firms, the honest answer is nothing.

**Snapshot risk** — The risk of relying on data that was true the day it was gathered. Filed accounts, scores and reports are all snapshots; customers keep moving after the photo is taken.

**Timing failure** — Finding out at the annual review what you needed to know in month three. Most credit losses aren't information failures — the signals existed — they're timing failures.

**Capacity is not risk** — Two different questions that get collapsed into one score: how much trade can this business support (capacity), and how likely is it to fail (risk)? A small, safe business and a large, fragile one need different answers, not the same number.

**Trust profile** — A business's living record of how it trades and pays — built continuously, owned by the business, and readable by the people deciding whether to extend it credit.

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*Spotted a term we've missed — or a bit of slang your credit office uses that we should add? Tell us.*