No More Guessing What It Means, Glossary of terms
- Home
- Glossary of Terms
A.
Amortization
Gradual repayment of a loan through scheduled instalments.
Annual Percentage Rate (APR)
Total yearly cost of borrowing, including fees and interest.
Application Fee
Fee for processing a credit application.
Asset-Based Financing
Funding secured by business assets like trucks or trailers.
Asset-Based Lending
Lending based on the value of assets such as equipment or receivables.
Asset Value
The market value of a truck or trailer used as loan collateral
Assignment Clause
Part of a contract allowing transfer of rights to another party.
Application Fee
A fee charged by lenders for processing a loan application.
B.
Balloon Payment
Large final payment due at the end of some financing terms.
Balance Sheet
Financial statement showing a business’s assets, liabilities, and equity.
Bank Statements
Documents lenders may require to verify cash flow or income.
Bill of Lading
A document issued during transport that details shipment.
Bill of Sale
A document proving the sale and transfer of ownership of equipment.
Blue Book Value
Standardized vehicle valuation guide used by lenders.
Borrower
The person or entity receiving the loan.
Bridge Loan
Temporary loan used until permanent financing is arranged.
Broker
A third-party intermediary that facilitates leasing or lending
C.
Capital Lease
Lease that resembles a purchase, with asset ownership often transferring at the end.
Cash Advance
A short-term loan often based on future revenue projections.
Cash Flow
Funds moving in and out of a business; crucial in underwriting.
Certificate of Title
Legal document showing vehicle ownership.
Closing Costs
Fees due at loan finalization (e.g., legal, registration, documentation).
Collateral
An asset pledged to secure a loan.
Commercial Driver’s License (CDL)
Legal license required to operate commercial trucks.
Commercial Vehicle
Any vehicle used for business, especially transportation of goods.
Co-Signer
A second person agreeing to repay the loan if the borrower defaults.
Credit Application
Form submitted to initiate financing.
Credit Bureau
Agency that collects credit data (e.g., Equifax, Experian).
Credit History
A borrower’s track record of debt repayment.
Credit Limit
Maximum amount a lender allows a borrower to draw.
Credit Report
A record of a borrower’s debt history.
Credit Score
A numeric rating of creditworthiness.
D.
Debt Consolidation
Combining multiple loans into one with a single payment.
Debt Ratio
A metric lenders use to assess a business’s leverage.
Debt Service Coverage Ratio (DSCR)
Ratio of cash available to service debt.
Default
Failure to repay a loan on time.
Deferred Payment
A payment arrangement that delays initial payments.
Depreciation
Loss of value of an asset over time.
Down Payment
Initial upfront payment towards purchase or lease
Dump Trailer
Specialized trailer used in construction, eligible for certain financing.
E.
Early Payoff
Settling a loan before the agreed term ends.
Early Termination Fee
A penalty for ending a lease prematurely.
Encumbrance
A claim against a property (e.g., existing lien).
Enclosed Trailer
A trailer with full coverage, often financed with fixed terms.
End-of-Term Options
Choices available at the end of a lease (e.g., buy, renew, return).
Equipment Financing
Loans for buying business-critical equipment like trailers.
Escrow
A third-party holding of funds during the loan process.
F.
Fair Market Value (FMV)
Estimated value of an asset on the open market.
Finance Company
A non-bank entity providing business loans or leases.
Finance Lease
Lease where the lessee assumes risks/rewards of ownership.
Financial Statements
Documents (e.g., income statements) used to assess creditworthiness.
First-Time Buyer Program
Specialized financing for businesses with no borrowing history.
Fixed Interest Rate
Interest rate that stays the same for the loan term.
Flatbed Trailer
Common trailer type, often financed for logistics businesses.
Fleet Financing
Financing option for companies purchasing multiple vehicles.
G.
GAP Coverage
(Also GAP Insurance) Insurance covering the difference between the vehicle value and the loan balance.
Grace Period
Extra time after a payment is due without penalty.
Gross Vehicle Weight Rating (GVWR)
Max allowable weight for a vehicle including cargo
Guarantor
Person or entity guaranteeing repayment of the loan.
H.
Heavy Haul Trailer
Specialized equipment for large cargo, often requiring special financing
Heavy-Duty Truck
Commercial vehicle classification used in asset valuation.
High-Risk Borrower
A borrower with a poor credit history or financial standing.
Hire Purchase Agreement
A financing option where the buyer gains ownership after making all scheduled payments.
Holdback
A reserve or withheld portion in financing or leasing contracts.
I.
Instalment Loan
Loan paid back with regular fixed payments.
Insurance Binder
Proof of active vehicle insurance coverage required for loan funding.
Interest Rate
Percentage of principal charged by the lender for borrowing.
Interstate Use
Impacts taxes, licensing, and insurance for financed vehicles.
Invoice Price
Original dealer cost, used in loan valuation.
J.
Joint Application
A financing application submitted by two parties to improve approval chances.
Joint Liability
Both parties on a loan are equally responsible.
Judgment
Court ruling that may affect financing eligibility.
K.
Key Performance Indicator (KPI)
Metrics used by lenders to assess business health.
Kilometers vs. Miles
Units that impact valuation on international equipment sales.
Kilowatt Hour (kWH)
A unit of energy, relevant in electric or hybrid commercial vehicles.
L
Late Fee
Penalty charged for missing a loan or lease payment.
Lease Buyout
Option to purchase the leased vehicle at the end of the term.
Lease Term
Duration of a lease agreement.
Lessee
The party leasing the truck or trailer.
Lessor
The party providing the lease.
Liability Insurance
Required coverage in financing agreements.
Lienholder
The entity that holds the financial interest in the vehicle.
Lien
A legal right or claim against an asset used as collateral for a loan.
Line of Credit
A flexible loan option allowing a business to borrow up to a certain limit.
M.
Maintenance Costs
Recurring expenses factored into lease vs. buy decisions.
Market Value
Current value of an asset in its market.
Monthly Payment
Fixed or variable recurring loan or lease charge.
Maturity Date
Final due date on a loan agreement.
N.
Net Income
Profits after expenses, crucial in credit evaluation.
Non-Recourse Loan
The lender can only seize the vehicle if the borrower defaults
O.
Operating Lease
Short-term lease without transfer of ownership.
Origination Fee
Cost charged by lenders to initiate a loan.
Over-the-Road (OTR)
Long-haul transport operation affecting vehicle type.
P.
Payment Schedule
Timeline of expected payments in financing terms
Payoff Amount
The total sum required to fully settle the loan.
Personal Guarantee
individual agreement to repay business debt.
Prepayment
Paying part or all of a loan early.
Prepayment Penalty
A fee charged for paying off a loan early.
Principal
Original loan amount before interest.
Pre-Approval
A preliminary evaluation of a borrower’s creditworthiness before finalizing a loan.
Purchase Option
Right to buy a leased asset at the end of the term.
Q.
Qualified Borrower
Meets specific lender requirements for loan approval.
Quarterly Reports
Financial updates are often requested in loan monitoring.
R.
Refinancing
Replacing an existing loan with better terms.
Repossession
The lender reclaims the vehicle after default.
Residual Value
Expected value of an asset at the end of a lease.
Risk Assessment
Lender analysis of potential for default.
Roadside Assistance
Sometimes bundled into full-service lease programs.
S.
Schedule of Values
A breakdown of costs used in insurance and lending.
Secured Loan
Loan backed by collateral, such as a truck or trailer.
Semi Truck Financing
Specialized funding for 18-wheelers and tractor units.
Short-Term Lease
Equipment rental under 24 months.
Sinking Fund
Set-aside money for future debt service.
Small Business Loan
A funding source often used for first-time buyers.
Start-up Capital
Funds required to launch a trucking business.
Start-up Business Loan
Financing designed for newly established trucking businesses.
Subprime Financing
Lending to borrowers with poor credit.
Supply Chain Financing
Loan types tied to logistics cash flow.
T.
Title
A legal document proving ownership of a vehicle
Tax Returns
Often required for income verification.
Term Loan
Loan repaid over a set period.
Term Length
The duration over which a loan must be repaid.
Title Transfer
Legal change of vehicle ownership.
Trailer Financing
Funding for all types of commercial trailers.
Trailer Types
Dry van, reefer, flatbed, Conestoga, step deck, etc.
Truck Loan
Specific loan type for purchasing commercial trucks.
U.
Underwriting
The loan review process by a lender.
Unsecured Loan
Financing without collateral (rare in trucking).
Usage Restrictions
Limits on how financed vehicles can be used.
Used Equipment Financing
Loans provided to purchase pre-owned trucks or trailers.
V.
Variable Rate
(Also, Variable Interest Rate) Interest rate that changes over time.
Vehicle Inspection Report
May be required in loan agreements.
VIN (Vehicle Identification Number)
Unique ID code for trucks/trailers.
W.
Warranty
Promise to repair or replace a vehicle or equipment under certain conditions.
Warranty Coverage
Terms for repairs during a set period.
Working Capital
Liquid funds available for operations.
Write-Off
Business expense deductions on financed assets.
X.
nil
Y.
Yield
The return on investment from lending activity.
Z.
Zero Down Financing
A loan structure requiring no upfront payment.
Zone Licensing
Regulatory requirements for geographic operation zones.