The original amount borrowed, before interest and fees are added.

The cost of borrowing money, usually expressed as a percentage per year.
Can be fixed or floating. The interest rate might be quoted on an annualised basis, or you might pay a per month interest rate.

This is usually only in relation to home loans with banks, though some non-bank lenders might have fixed and floating rates. The fixed rate is an interest rate that stays the same for a set period. A floating rate will change over time based on market conditions.

The length of time you have to repay the loan.

How often you make payments (e.g. weekly, monthly), and on what dates.

Balloon payments are in relation to vehicle or other asset purchases. When you have a loan with a balloon payment, usually your repayments are smaller, but you must pay a lump sum at the end of the loan, to pay it off. This type of financing is normally offered by car dealers rather than finance companies.

Explore vehicle finance here.

The maximum amount you’re approved to borrow. Often this term relates to invoice finance or it might be the total amount you can borrow with a line of credit.

When you actually access (or “draw”) funds from a loan facility. This could be in relation to a business loan or each time you receive a payment after submitting invoices to your invoice finance funder.

A lump sum loan repaid over a fixed period. This term is usually related to secured business loans and unsecured business loans.

A flexible facility allowing you to overdraw your business bank account up to a set amount. Often carries hefty interest rates.

A facility that advances cash against unpaid invoices.
👉 Learn more in our invoice finance guide.

Also called invoice factoring.

A loan that is secured by an identifiable item, or group of items. It could be a vehicle, piece of equipment, machinery, boat, property or something else. This type of loan will require a specific security agreement.

Explore our range of secured loans here.

A loan that doesn’t have any property or asset used as security. For most lenders, this still means that the directors must sign personal guarantees. Sometimes they will take a general security agreement, other times they will only do that if you are at risk of not repaying your loan (eg you miss some repayments).

Funding used to purchase business assets like vehicles or machinery. The item you’re buying will be used as security.

Find out more about secured loans here.

A flexible lending facility that allows a business to borrow, repay, and re-borrow funds up to an approved limit.

You only pay interest on the amount you use, not the full limit. It’s similar to an overdraft with a limit that you can borrow. Great for managing short-term cash flow gaps.

A list of all outstanding invoices owed to your business.

The percentage of an invoice you can access upfront (e.g. 80%).

With recourse invoice finance and factoring, you remain responsible if a customer doesn’t pay.

The lender takes on the risk of non-payment. This is risky for the lender, so is very rare and the lender would normally have an insurance policy to cover any losses.

Reductions in invoice value due to disputes, credits, or returns.

The borrowing system and agreement that you have with your invoice finance lender.

Explore invoice finance here.

The assets that are used to secure a loan.

Find out more about secured loans here.

A document to supplement your loan agreement, or it might form part of your loan agreement. This document (once registered correctly) entitles the lender to any of the assets of your business that are not secured by any other lender.

A document that goes with a loan document when you have a secured loan. It will list the identifiable items that are being used to secure the loan (the collateral). If you don’t repay the loan, this document gives the lender the right to take the collateral.

This document records your personal promise to pay back a loan if your business fails to repay it. It may include the lenders’ right to take your property in order to sell it to recover what you owe them.

A registered mortgage is the most formal type of property security. It’s registered on the property title with Land Information New Zealand (LINZ), showing that the lender has a legal interest in the property. It prevents you from selling the property without talking to your lender.

Sometimes if you have equity in your property but the bank won’t release it, you can use that equity to get money from a non-bank lender. That lender will register a mortgage, but it will be a second mortgage. If the property must be sold to recover debt, the bank gets first dibs on the sale proceeds, then the second mortgage holder gets what they are owed (so long as the sale price covers all debt),

A caveat is a different kind of security notice. Instead of giving the lender full rights to your property, a caveat acts as a warning on the title that someone else (the caveator) has an interest in your property.

Find out more in this article - Registered mortgage vs caveat: What’s the difference for NZ business loans? — NZ Business Finance