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Loan jargon decoder

Type a lending term and Mr translates it in one line. Covenants, caveats, LVRs, balloons — no glossary-speak, just what it means for your business.

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45 terms decoded

Amortisation: Paying a loan down bit by bit, so each repayment chips away at the balance as well as covering the interest.
Application fee · also: establishment fee, setup fee: A one-off charge some lenders make for assessing and setting up your loan. Ask whether it's payable even if you don't proceed.
Arrears: Repayments that are overdue. Being in arrears is what turns a lender from friendly to formal.
Balloon payment · also: residual: A lump sum left owing at the end of a loan, which keeps regular repayments lower but has to be paid or refinanced when the term ends.
Bank statements: The lender's favourite reading. Several months of business account statements show real money in, real money out and how you handle the gaps.
BAS · also: business activity statement: Your Business Activity Statement — the regular report to the ATO for GST, PAYG withholding and instalments. Lenders read it as a turnover check.
Caveat: A notice lodged on a property title that warns anyone dealing with the property that someone else claims an interest in it.
Caveat loan: A short-term business loan secured by lodging a caveat over property rather than a registered mortgage. Quick to set up, built to be repaid or refinanced soon.
Comprehensive credit reporting · also: CCR, positive reporting: The system where credit files show your repayment history, not just the bad bits, so on-time payments can count in your favour.
Covenant: A promise inside a loan agreement — keep insurance, send financials, don't take on more debt without consent. Break one and the lender can act.
Credit enquiry: A record on your credit file showing a lender looked at it because you applied. A pile of them in a short time can worry the next lender.
Credit file · also: credit report: The record credit reporting bodies hold about how you've borrowed and repaid. You can get yours free every three months.
Debt service cover · also: DSCR, serviceability: How comfortably your cash flow covers all your loan repayments. More breathing room means a more comfortable lender.
Default: A formal listing that you failed to pay a debt. It generally sits on a credit file for five years, even after you pay it.
Director penalty notice · also: DPN: An ATO letter that can make company directors personally liable for unpaid PAYG withholding, GST or super guarantee charge.
Discharge · also: discharge fee: Formally removing a mortgage or caveat from a title once the loan is repaid. Lenders charge a fee to do the paperwork.
Early repayment fee · also: break cost, exit fee: A charge some lenders apply if you pay a loan off before the agreed date. Always ask about it before signing.
Equity: The part of a property (or business) you actually own — its value minus what's owed against it.
Exit strategy: How a short-term loan will be repaid: a sale, a refinance, a payout from a customer or a tax refund. Lenders want it named and believable.
First mortgage: The main mortgage on a property, first in line to be repaid if the property is sold.
GIC · also: general interest charge: The ATO's general interest charge on overdue tax. It compounds daily and, from 1 July 2025, is no longer tax deductible.
Guarantor: Someone who promises to repay the loan if the borrower can't — often the directors of a company borrower.
Interest-only: Repayments that cover interest but not the balance, so the full amount is still owed at the end of the term.
Letter of offer · also: loan offer, indicative offer: The lender's written terms: amount, term, security, fees, conditions. Read every line before you sign anything.
Line of credit · also: revolving facility: A limit you can draw on, repay and draw again, paying for what you use. Handy for lumpy cash flow, risky as a permanent crutch.
LVR · also: loan to value ratio: Loan-to-value ratio: the loan as a share of the property's value. Lower LVR, more cushion, happier lender.
Mortgage: A registered security over property that lets the lender sell it if the loan isn't repaid.
No-doc loan: Loose label for lending that relies on security and alternative evidence instead of full financial statements. There's always some paperwork.
PAYG withholding: Tax you hold back from wages and pay to the ATO. Unpaid PAYG withholding is one of the debts a director can be personally caught by.
Personal guarantee: Your personal promise to repay a business debt if the business can't. It puts your own assets in the frame.
PPSR · also: Personal Property Securities Register: The Personal Property Securities Register, where lenders register their interest in business assets like vehicles and equipment.
Principal: The amount you borrowed, as opposed to the interest and fees charged on it.
Refinance: Replacing one loan with another, usually to change the term, lender, structure or security.
Second mortgage: A mortgage registered behind an existing first mortgage, using the equity left over in the property.
Secured loan: A loan backed by an asset — often property — the lender can rely on if repayments stop.
Security · also: collateral: What the lender holds as a fallback: property, equipment, a vehicle or a guarantee.
Serviceability: Whether your income can comfortably carry the repayments. Every lender asks this one, in one form or another.
Settlement: The moment the loan is finalised and funds are paid out — to you or straight to whoever needs paying.
Statutory demand: A formal demand that a company pay a debt within a strict deadline, or face being presumed insolvent. Never ignore one.
Term: How long you have to repay the loan, from a few months to several years.
Term loan: A lump sum paid out once and repaid over a set term on a set schedule.
Turnover: Total sales before expenses. Unsecured lenders size loans largely on turnover and how steadily it arrives.
Unsecured loan: A loan with no specific asset as security, sized on the business's cash flow — usually with a director's guarantee.
Valuation: An independent opinion of what a property is worth, ordered by the lender so it knows how much cushion it really has.
Working capital: The cash a business needs to keep the wheels turning between paying suppliers and getting paid by customers.

How to use the decoder

Keep it open in a tab while you read a letter of offer, a lender's email or an ATO notice. Search by the term itself or a common alias — "DSCR" finds debt service cover, "collateral" finds security. Each definition is deliberately short: enough to follow the conversation and know which questions to ask next.

For the bigger picture behind the words, Mr's guide to business loan jargon in context walks through how the terms fit together in a real loan, and what a business loan really costs explains the fees that hide behind friendly labels.

Three terms worth understanding before you sign

Security. What the lender can fall back on if repayments stop. Know exactly which property or assets are named, and whose they are.

Personal guarantee. Your promise to cover the business's debt. Directors of a company borrower are commonly asked for one; read whether you'll need to sign a guarantee before you're handed the pen.

Exit strategy. For short-term and caveat lending, the plan to repay matters as much as the security. A believable exit is what makes fast, short money workable.

Still lost in the paperwork?

That's what people are for. Send a 60-second enquiry and a lending specialist will walk you through what you need and what the terms mean for your business — with no credit check to enquire and no spraying your details across a list of lenders.

Frequently asked questions

Why does business lending use so much jargon?

Partly habit, partly precision. Terms like LVR, caveat and covenant each describe something specific in a loan contract. The trick is knowing what each one means for you, which is what the decoder is for.

Which terms matter most in a letter of offer?

Start with the amount, term, security, guarantees, every fee (including early repayment and discharge fees) and any covenants. If a term in the offer isn't clear to you, ask the lender to explain it in writing before you sign.

Can I ask Mr about a term that isn't listed?

Yes. Mention it in your enquiry or on the phone and a real person will explain it. We add new terms to the decoder as owners ask about them.

Is the decoder legal or financial advice?

No. Each definition is a plain-English summary for general understanding. Your loan documents, and your accountant or lawyer, have the final word on what a term means in your contract.

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