Finance Glossary

When the leased asset(s) have been received in good condition, an acceptance certificate is signed by the lessee confirming that the equipment is fit for purpose, usually marking the start of the lease agreement. In doing this, the lessee’s risk of paying for equipment that is damaged, faulty or has not been delivered is minimised, and the lessor’s risk of paying a fraudulent supplier or dealing with customer complaints, is also reduced.

The process of spreading the cost of intangible assets (such as patents, copyrights, or goodwill) over their useful life. It represents the gradual reduction of the asset’s value on the balance sheet over time.

AFR, or Annual Financial Return, refers to a yearly report that provides a snapshot of a company’s financial performance. It typically includes key financial statements like the balance sheet, income statement, and cash flow statement. These statements provide insights into the company’s assets, liabilities, revenues, expenses, and overall profitability.

An Annual Flat Rate is a straightforward method of calculating the cost of borrowing over a year. It represents the total interest charged on the initial loan amount as a fixed percentage, without factoring in the declining balance of the loan as payments are made.

For example, if you borrow £10,000 at an annual flat rate of 5%, you will pay £500 in interest each year, regardless of how much principal has been repaid.

While easy to understand, the annual flat rate does not account for the true cost of borrowing compared to other methods like the Effective Annual Rate (EAR) or Annual Percentage Rate (APR), which incorporate repayment schedules and compounding effects. It is commonly used in finance agreements, but borrowers should ensure they compare it with other rate types to fully understand the cost of their loan.

APR (Annual Percentage Rate) is the total cost of borrowing money, expressed as a percentage. It takes into account not only the interest rate but also any additional fees or charges associated with the loan. APR gives you a clear picture of how much it will cost you to borrow money over a year, including all the hidden costs. This helps you compare different loan offers and choose the one that’s most affordable.

Here are some examples of fees that can be included in APR:

• Origination fees – Fees charged by lenders to process your loan application.
• Late payment fees – Penalties for making payments after the due date.
• Prepayment penalties – Fees charged if you pay off your loan early.

When comparing loan offers, always look at the APR to get a complete understanding of the true cost of borrowing. For more insight, see our article on Understanding Representative APR: Definition & Calculation.

Anti-Money Laundering (AML) refers to a set of laws, regulations, and procedures designed to prevent criminals from disguising illegally obtained funds as legitimate income. AML measures are implemented by businesses, particularly in financial services, to detect, monitor, and report suspicious activities that may indicate money laundering or other financial crimes.

The AML process involves several key components:

1. Customer Identification & Verification – Ensuring the identities of customers are properly verified through processes like Know Your Customer (KYC).
2. Risk Assessment – Evaluating customer behaviour and transactions to determine the likelihood of financial crime.
3. Monitoring & Reporting – Continuously observing transactions for unusual patterns or activities and reporting suspicious findings to relevant authorities, such as Financial Intelligence Units (FIUs).

Money laundering typically involves three stages:

• Placement – Introducing illicit funds into the financial system.
• Layering – Conducting complex transactions to obscure the origins of the money.
• Integration – Reintroducing the “cleaned” money into the economy as legitimate funds.

AML frameworks are essential for businesses to comply with international and local regulations, protect themselves from legal penalties, and contribute to the global fight against organised crime, corruption, and terrorism financing. By implementing robust AML practices, businesses not only protect themselves but also help maintain the integrity of the global financial system.

Advances in technology, such as artificial intelligence and machine learning, are increasingly being used to strengthen AML processes by automating risk detection, improving accuracy, and enabling real-time monitoring.

A business asset is anything that has economic value. Assets include everything owned by the company which have a current value or will provide monetary benefit in the future. They are key aspects of a company’s balance sheet.

Typically these are things that the company could sell and are broadly divided into Hard and Soft Assets. Hard assets tend to retain a significant amount of their value over time, such as a lorry or a machine, whereas soft assets tend to depreciate rapidly or lose value once installed, such as technology, furniture or sports equipment.

Contact us today and learn more about Asset Finance options from Portman.

Asset finance can provide significant cash flow benefits to customers looking to purchase equipment for their businesses. The customer would typically obtain the equipment through a hire purchase or equipment leasing agreement whereby the lender or hirer takes ownership of the equipment for the duration of the term of the agreement and the customer pays an agreed sum to the lender or hirer for use of the assets.

An asset-backed security (ABS) is a tradable financial instrument that’s created by pooling income-generating assets and selling them on to investors. Think of it like this:

• A company (like a bank) has a bunch of loans it’s issued (e.g., car loans, invoices).
• These loans generate regular cash flow (payments from borrowers).
• The company groups these loans together and creates a security backed by the expected future cash flow from those loans.
• This security, the ABS, is then sold to investors who receive a portion of the cash flow generated by the underlying assets.

Key points to remember:

• The underlying assets can be various things, but they all generate cash (e.g. car loans, invoices, business loans, etc.).
• ABS allows companies to free up capital on their balance sheet by selling the future income stream from the assets.
• Investors benefit from potentially attractive returns and diversification in their portfolio.

Asset-based lending is a financing method where a lender provides credit to a borrower based on the value of the borrower’s assets. The lender assesses the value of the borrower’s assets, such as inventory, accounts receivable, or equipment. A loan is then extended, typically secured by these assets.

ABL is often used by businesses that require short-term financing to support operations, working capital, or growth initiatives. Asset-based lending can be a flexible and accessible financing option for businesses with significant asset value but limited access to traditional forms of credit.

A balance sheet is a financial statement that discloses the financial position of a business, showing the firm’s assets, liabilities and shareholders’ funds. It is composed of 3 main elements

A balloon payment is the final amount due on a loan that is structured as a series of small monthly payments followed by a single much larger sum at the end of the loan period. The early payments may be all or almost all payments of interest owed on the loan, with the balloon payment being the principal of the loan. Balloon payment value is often relative to the estimated final value of the asset purchased or leased, often used for auto loans.

A broker is an intermediary who facilitates transactions between buyers and sellers. They typically charge a commission for their services. A broker is like a middleman who helps connect people who want to buy or sell something. They can be found in various industries, such as:

• Financial markets – Stockbrokers, bond brokers, and commodity brokers assist in buying and selling stocks, bonds, and commodities.
• Real estate – Real estate brokers aid in finding and negotiating properties for buyers and sellers.
• Insurance – Insurance brokers help clients find and purchase the right insurance policies.

Brokers bring expertise and advice to the table. It’s crucial to pick a broker who has your best interests at heart. See why Portman from our page on Why Use A Finance Broker.

Business-to-Business (B2B) refers to e-commerce transactions where businesses sell products or services to other businesses. Examples include wholesale distributors, software-as-a-service (SaaS) providers, and supply chain vendors. B2B transactions are typically larger in volume and value, while focusing on fostering long-term relationships and streamlining business operations.

Business-to-Consumer (B2C) is a model where businesses sell products or services directly to individual consumers. It’s the most common type of e-commerce, encompassing everything from online retail stores and meal delivery services to streaming platforms. B2C focuses on meeting consumer needs quickly and efficiently, often with user-friendly interfaces and personalised experiences.

Capital expenditure is money spent by businesses on acquiring or maintaining their fixed assets. When a company invests in fixed assets. Leasing can a beneficial way of securing these assets without paying up-front capital expenditure, especially for capital-intensive businesses, such as construction or manufacturing businesses, that require large capital assets for proper business function.

A cash injection refers to an infusion of capital, typically in the form of cash, into a business. This capital can come from various sources, such as investors, lenders, or the business owner themselves.

Cash injections can serve a variety of purposes, including:

• Funding growth initiatives: Expanding operations, entering new markets, or developing new products.
• Improving working capital: Covering short-term operational expenses or managing cash flow gaps.
• Debt repayment: Reducing existing debt obligations or restructuring loans.
• Restructuring or turnaround situations: Providing financial resources to navigate challenging periods.

Examples – A venture capital firm investing in a startup, a business taking out a loan for expansion, or an owner injecting personal funds into their company.

The net amount of cash and cash equivalents moving into and out of a business, reflecting its operating, investing, and financing activities over a specific period. It indicates a company’s ability to generate cash and meet financial obligations.

Collateral is something valuable, like property or equipment, that you pledge as security when borrowing money. If you can’t repay the loan, the lender can take possession of the collateral and sell it to recover their losses.

Commission is a fee paid to an individual or entity for facilitating a transaction, typically calculated as a percentage of the total value of the sale or deal. Commissions are commonly used as compensation in industries like sales, real estate, and finance.

A commitment letter is a formal document from a lender stating they’re willing to loan you a specific amount of money, subject to certain conditions. It outlines the key terms of the loan, such as the interest rate, repayment period, and any fees involved. Think of it like a promise from the lender, giving you the confidence to move forward with your plans.

Commodities are basic goods, typically raw materials, that are traded on a commodity exchange. They are essential to the economy and are often used as inputs in the production of other goods and services.

Here are some examples of commodities:

• Energy – Oil, natural gas, coal
• Metals – Gold, silver, copper, iron ore
• Agricultural products – Wheat, corn, coffee, grain
• Livestock – Cattle, hogs, poultry

Commodities are often traded in futures markets, where buyers and sellers agree to a price for a future delivery of the commodity. This allows businesses to hedge against price fluctuations and manage their risk.

Simply put, commodities are the building blocks of the economy, and their prices can have a significant impact on the overall health of the global market.

Consumer-to-Business (C2B) is an e-commerce model that flips the typical traditional models. This model allows individuals to provide products or services to businesses. This can include freelancers offering their skills, content creators partnering with brands, or consumers selling data insights. C2B thrives in the digital age, where platforms make it easy for consumers to connect directly with businesses.

Consumer-to-Consumer (C2C) is an e-commerce model where individuals sell products or services directly to other consumers, often using third-party platforms. Examples include peer-to-peer marketplaces, auction sites, and apps for reselling goods. C2C primarily relies on trust, community engagement, and seamless technology to facilitate transactions.

A UK government-backed financing scheme designed to provide financial support to businesses during the initial stages of the COVID-19 pandemic.

The Coronavirus Business Interruption Loan Scheme / CBILS offered loans of up to £5 million to eligible businesses to help them cover their operating costs and manage cash flow challenges. The government guaranteed 80% of the loan, making it easier for businesses to access financing from lenders. CBILS was a temporary scheme that concluded on March 31, 2021.

As of July 2024, The Growth Guarantee Scheme (GGS) has replaced this government-backed finance scheme for businesses. For more, read our article on The Government-Backed Growth Guarantee Scheme.

A percentage of taxable profits paid as tax based on accounting profit with certain adjustments. Tax allowances may be claimed in certain circumstances.

A court ruling in favour of a legal entity claiming that they haven’t been paid monies owed to them, applying to both businesses and individuals. Once the CCJ has been issued and noted in the public domain, it will be used by credit reference agencies as a means to reassess the creditworthiness of that person/business – resulting in a negative impact.

Credit terms are the agreed-upon conditions of a credit arrangement, including repayment schedules, interest rates, and collateral.

A creditor is an individual, organisation, or entity that lends money or extends credit to another party.

CDD typically involves collecting and verifying information about a customer’s identity, understanding the nature of their activities, and evaluating the risk they pose. It is a critical component of regulatory compliance and risk management frameworks.

Debenture is a long-term debt instrument issued by a corporation or government to raise capital. Debentures are essentially unsecured loans, meaning they are not backed by specific assets of the issuer. Investors rely on the overall creditworthiness and reputation of the issuer to receive their promised interest payments and the return of their principal investment at maturity.

A payment made at the start of a finance agreement which has the effect of reducing the monthly payments throughout the term. Referred to on a hire agreement as an ‘initial payment’. Its purpose is to reduce the risk for the lessor caused by any loss in value for assets as soon as they are no longer classed as new.

The allocation of the cost of tangible assets (such as buildings, machinery, or vehicles) over their useful life. It reflects the decrease in the value of these assets due to wear and tear, obsolescence, or usage over time.

A regularly scheduled mandate from the lessee, arranged by lessors to collect lease payments direct from the lessee’s bank account.

A Director is an individual appointed or elected to a company’s board of directors, responsible for overseeing the organisation’s activities and making high-level decisions. Directors ensure compliance with legal obligations, set strategic goals, and act in the best interest of the company and its stakeholders.

A down payment is a portion of the total cost of something that you pay upfront, usually when purchasing expensive items like a house or a car. Think of it as a way of showing the seller you’re serious about the purchase and reducing the amount you need to borrow.

Where a lease agreement is cancelled by the lessee before the end of the contracted primary or minimum period. Terms of this may vary depending on if the credit agreement is regulated or non-regulated.

Earnings Per Share (EPS) is a financial metric that measures the portion of a company’s profit allocated to each outstanding share of common stock. It is calculated by dividing the company’s net income (minus preferred dividends) by the average number of outstanding shares during a specific period. EPS is a key indicator of a company’s profitability and is often used by investors to assess its financial health and performance.

EPS = (Net Income) − (Preferred Dividends​) / Weighted Average Outstanding Shares

• Net Income – The company’s total profit after all expenses, taxes, and costs have been deducted from revenue.
• Preferred Dividends – Dividends that must be paid to preferred shareholders before common shareholders receive any earnings (applicable only if the company has preferred shares).
• Weighted Average Outstanding Shares – The average number of common shares outstanding during the reporting period, adjusted for any stock splits or share buybacks.

A more detailed and rigorous process of verifying and monitoring high-risk customers or transactions to prevent financial crimes, such as money laundering and terrorism financing. Enhanced Due Diligence is typically applied when a customer poses a higher risk due to factors like large transactions, connections to high-risk jurisdictions, or complex ownership structures. EDD involves collecting additional information, such as the source of funds, detailed transaction histories, and ongoing monitoring, to ensure compliance with regulatory standards.

Equity Capital are the funds raised by a business in exchange for ownership shares, typically through issuing common or preferred stock. Equity capital represents the owners’ stake in the company and is a key component of its total capital structure. Unlike debt, equity capital does not need to be repaid and carries the potential for higher returns through dividends or share value appreciation, but it also involves sharing control and profits with investors.

A finance lease, also known as a capital lease, is essentially a long-term rental agreement with some key characteristics:

• Ownership transfer – The lessor (typically a finance company) owns the asset but grants the lessee (the business) full control over it for the lease term. Ownership often transfers to the lessee at the end of the lease for a minimal fee.
• Economic risks and rewards – The lessee bears most of the risks and rewards of ownership. This means the lessee is responsible for things like maintenance and depreciation, but also benefits if the asset value increases.
• Lease payments – Lease payments are structured to cover the asset’s cost and a return on investment for the lessor.

In simpler terms, a finance lease allows a business to use an asset like they own it, with eventual ownership possible, while spreading out the cost over time.

Fiscal refers to anything related to government or business finances, especially taxes, budgets, or financial management. It is often used in terms like “fiscal year,” meaning a 12-month period a company or government uses for accounting and financial reporting.

A UK government-backed scheme designed to stimulate business growth.

The GGS operates by offering loans to eligible UK businesses that demonstrate a solid growth potential. By guaranteeing a portion of these loans, the government encourages lenders to provide financing at more favourable terms, such as lower interest rates. This makes it easier for businesses to access the capital necessary for expansion, investment in new equipment, hiring additional staff, or entering new markets.

The GGS is intended to boost the UK economy by supporting businesses in their growth endeavours. It aims to create jobs, increase productivity, and foster innovation. By reducing the financial barriers to business expansion, the GGS can help businesses achieve their full potential and contribute to the overall economic prosperity of the United Kingdom.

Learn more on how Portman can support your business with the Growth Guarantee Scheme GGS

Typically assets that meet the DIMS criteria (Durable, Identifiable, Moveable and Saleable) designed to be held for the longer term and hold onto their value which offer the Lender or Lessor a greater deal of security from the finance agreement.

Hire purchase (HP), also known as an installment plan, is a financing option for acquiring an asset. Here’s a breakdown:

• Down payment – You pay an initial amount upfront, typically a percentage of the total cost.
• Installment payments – You spread out the remaining cost plus interest in regular payments over a set period.
• Ownership – Importantly, you don’t legally own the asset until all payments are complete.

Think of it like gradually renting an item with the option to buy it at the end. It’s commonly used for expensive goods, allowing you to access them sooner while managing the cost.

Interest rate is the cost of borrowing money, expressed as a percentage of the principal amount. It’s essentially the fee you pay to a lender for using their money. Interest rate is the price you pay for borrowing. The higher the interest rate, the more you’ll have to pay back over time.

There are two main types of interest rates:

• Simple interest – Calculated only on the principal amount.
• Compound interest – Calculated on both the principal amount and the accumulated interest.

Considering the interest rate when considering finance can be a major factor in determining the overall cost of borrowing.

For more insight on Interest Rates, take a look at our article: How should small businesses react to interest rate rises?

Financial solutions, most often leasing, offered by vendors to their customers that is not manufacturer (captive) finance. The vendor introduces the customer to either a broker or funder. Around a quarter of total new asset finance business in the UK market is sold through the vendor channel.

A Joint Venture (JV) is a business arrangement where two or more parties agree to combine resources, expertise, or capital to achieve a specific goal or project. Each party retains its individual legal identity but shares the risks, responsibilities, and profits associated with the venture, as defined in their agreement. JVs are typically limited in scope and duration.

Just-in-Time (JIT) Inventory is a business strategy where inventory is ordered and received only as needed for production or sales, minimising storage costs and reducing waste. This approach aligns supply closely with demand to improve efficiency and lower expenses, but requires precise coordination with suppliers and accurate demand forecasting.
Some examples of successful companies that use JIT inventory management include Toyota, Apple, Amazon, Burger King, Zara, and McDonalds.

Know Your Customer (KYC) is a critical process used by businesses, particularly in financial services, to verify and validate the identity of their clients. It is a foundational component of risk management and regulatory compliance frameworks designed to prevent financial crimes such as fraud, money laundering, and terrorist financing.

At its core, KYC ensures that businesses understand exactly who their customers are. This involves collecting and verifying essential information, such as official identification documents like passports or driver’s licenses, proof of address, and financial details. By confirming a customer’s identity, businesses can assess the legitimacy of their activities and identify any potential risks.

KYC procedures typically take place when onboarding a new customer, but they do not end there. Ongoing monitoring is often required, particularly for high-risk clients or significant transactions, to ensure that customer information remains current and aligned with any changes in their behaviour or risk profile.

Effective KYC practices not only help businesses meet regulatory requirements, including Anti-Money Laundering (AML) and Counter-Terrorist Financing (CTF) laws, but also protect organisations and their customers from illicit activities. Promoting transparency and accountability, KYC enhances trust and security within the financial ecosystem and creates a more secure business environment.

Ultimately, KYC is more than a legal requirement. It is an essential process that safeguards businesses, builds trust, and ensures that financial systems operate with integrity and security. More information on KYC requirements and other anti-money laundering legislation can be found on the Government website.

An agreement between the lessor and the landlord of the lessee’s building. It gives the lessor the right to enter the premises to inspect or remove their assets during the period of the finance agreement.

An agreement where the asset owner (referred to as the ‘lessor’) allows use of an asset to another party (the ‘lessee’) for a certain amount of money. The use of this term indicates that it’s a hire agreement with no guaranteed purchase option at the end of the lease period.

The minimum amount of time that the lessee agrees to lease an asset. It can be referred to as the non-cancellable period or primary lease term.

A lease agreement where the lessee can continue to rent the equipment at the end of the original term. This can continue for a long as the customer requires the use of the equipment.

A lender is an individual or institution that provides loans to borrowers. They can be banks, credit unions, online lenders, or even individuals. A lender is someone who gives you money with the expectation that you’ll pay it back, usually with interest.

Common examples or types of lenders, include:

• Banks – Traditional financial institutions that offer a wide range of loan products.
• Credit unions – Member-owned financial cooperatives that often offer more favourable terms than banks.
• Online lenders – Internet-based companies that specialise in providing loans.
• Individuals – People who lend money to others, often through peer-to-peer lending platforms.

When choosing a lender, it’s important to compare interest rates, fees, and repayment terms to find the best deal for your needs. Portman can help speed-up your search and do the hard work for you. Enquire now and we’ll do the rest to compare and find the best lending opportunities for your business.

The party (an individual or company) that becomes a user of an asset owned by another party (the ‘lessor’) through a lease agreement.

The owner of an asset that can be hired through a lease agreement. In a lease agreement, the lessor is the party who owns the property or asset being leased and grants its use to another party (the lessee) for a specified period of time. The lessor typically receives periodic payments from the lessee for the right to use the property.

A limited company is a type of business structure where the owners’ liability is limited to their investment in the company. This means that if the company goes bankrupt, the owners’ personal assets are generally protected. A Ltd is a business structure where the owners’ personal wealth is shielded from the company’s debts. This makes it a popular choice for entrepreneurs who want to protect their personal assets while running a business.

There are two main types of limited companies in the UK:

• Private limited company (Ltd) – This type is typically owned by a small group of people and is not listed on a public stock exchange.
• Public limited company (PLC) – This type is listed on a public stock exchange and can be owned by anyone who buys its shares.

Limited companies offer several advantages, including:

• Limited liability – Protects the owners’ personal assets.
• Tax benefits – May be eligible for certain tax breaks.
• Legal entity – The company is a separate legal entity from its owners.
• Legal entity – The company is a separate legal entity from its owners.
• Credibility – Can enhance the company’s reputation and credibility.

If you’re considering starting a business, it’s important to weigh the advantages and disadvantages to determine if it’s the right structure for you. Read our resource for The Ultimate Guide to Setting Up a Limited Company in the UK.

A measure of a company’s ability to meet its short-term financial obligations with its available assets, typically cash or assets that can be quickly converted into cash without significant loss. High liquidity implies greater financial flexibility and lower risk.

What is a Merchant Cash Advance?

A Merchant Cash Advance is finance that provides businesses with upfront capital in exchange for a portion of future credit and debit card sales. Unlike traditional loans with fixed repayment schedules, MCAs (Merchant Cash Advances) offer flexible repayment terms tied directly to a business’s sales volume. Businesses receive a lump sum payment and subsequently repay a percentage of daily card transactions until the total amount, including fees, is settled. MCA funding is often sought for rapid access to capital, particularly when traditional lending options may be inaccessible or time-consuming.

Applying with Portman, you’ll need to operate your business in a way that allows a minimum monthly card sales amount of £5,000. This flexible solution takes away the stress of fixed monthly payments and allows you to focus on what really matters – your business.

A lease that will continue until it is cancelled after the defined minimum hire period. Also referred to as an open-ended lease, minimum term rental or infinite rental.

Net Income is the total profit a business earns after subtracting all expenses, taxes, and costs from its total revenue. Often referred to as the “bottom line,” net income reflects the company’s financial performance and is a key indicator of profitability. It appears on the income statement and is used to calculate earnings per share (EPS) for investors. See FAQ: Is net profit the same as net income?

A financial metric used to evaluate the profitability of an investment by calculating the difference between the present value of future cash inflows and the present value of cash outflows. NPV accounts for the time value of money, meaning it considers that money received today is worth more than the same amount received in the future. A positive NPV indicates a potentially profitable investment, while a negative NPV suggests a loss.

A Non-performing Asset (NPA) is a financial asset, such as a loan or advance, that ceases to generate income for a lender because the borrower has failed to make principal or interest payments for a specified period, typically 90 days or more. NPAs are considered a sign of financial distress and can negatively impact a lender’s profitability and balance sheet.

An off-balance sheet refers to financial obligations or assets that a company does not record directly on its balance sheet. These items, such as operating leases, joint ventures, or contingent liabilities, are typically disclosed in the footnotes of financial statements and are used to manage risk or optimise financial reporting without affecting the company’s reported financial position.

Operating Cash Flow refers to the cash generated or used by a company’s core business operations during a specific period. It indicates whether a company can generate sufficient cash to maintain and grow its operations without relying on external financing. OCF is calculated by adjusting net income for non-cash expenses (like depreciation) and changes in working capital.

A Partner is a supplier, vendor or service provider who introduces their customers to Portman for business finance.
Previously, we used various terms like introducers, vendors, suppliers, and service providers to describe our valued business relationships. While these terms are accurate, we believe Partner more accurately reflects the collaborative and mutually beneficial nature of our association.
Moving forward, the Portman Partnership scheme will be the official term used to describe our network of businesses. This unified term reinforces our commitment to a collaborative approach, fostering growth for both your business and Portman. Within our content and documents, any reference to “Partner” refers specifically to the Portman Partnership scheme. Should you encounter any of the previously used terms, such as “Introducer” or “Vendor,” rest assured that they fall under the umbrella of the Portman Partner Network.

It can enable lessors to fund equipment that would have otherwise been declined due to perceived credit appetite risk. If a business or individual is unable to pay the amount due, it becomes the responsibility of the guarantor to clear any fees and maintain future payments. Learn more about Personal Guarantee.

Private equity refers to investments made in privately owned companies that are not listed on public stock exchanges. These investments are typically made by private equity firms, institutional investors, or accredited individuals, aiming to acquire, grow, or improve businesses to generate a high return on investment. Private equity funds often target companies in need of restructuring, expansion, or strategic direction, with the goal of selling the investment at a profit after a set period.

The pattern of payments over the lease period.

For example, a 3+33 profile means the lessee’s first payment/initial rental will equate to 3 months’ worth of payments, which is then followed by 33 ‘normal’ monthly payments. I.e., if the monthly payments are £200, the initial rental would be £600, followed by 33 months of £200 payments.

The quick ratio, also known as the acid-test ratio, measures a company’s ability to meet its short-term liabilities with its most liquid assets (those that can be quickly converted to cash). It is calculated as:

Quick Ratio = (Current Assets – Inventory) / Current Liabilities

A higher ratio indicates better short-term financial health, as it suggests the company can cover its obligations without relying on selling inventory. A ratio of 1 or higher is generally considered good, though this can vary by industry.

A UK government-backed scheme designed to help businesses recover from the economic impacts of the COVID-19 pandemic.

The Recovery Loan Scheme (RLS) offered loans of up to £10 million to eligible businesses to support their working capital and investment needs. The government guaranteed 70% of the loan, which encouraged lenders to provide financing at more favourable terms. This made it easier for businesses to access the capital they need to bounce back from the challenges posed by the pandemic. The scheme was intended to support businesses in rebuilding their operations, preserving jobs, and stimulating economic growth. By providing access to affordable financing, RLS helped businesses weather the storm and emerge from the pandemic stronger than before.

RLS has been replaced by GGS, available since the 1st Jul 2024. Read more from our Recovery Loan Scheme page for details.

A financial metric measuring the profitability of an investment relative to its cost. It helps determine the efficiency and effectiveness of an investment by comparing the net profit generated to the initial investment amount. A higher ROI indicates a better return on the money invested.

Example Scenario – A cafe owner in London decides to invest in a new, energy-efficient coffee machine costing £8,000. The machine is expected to reduce energy consumption by 40% and increase coffee production by 15%.

A means of releasing equity through selling assets to a lessor for a lump sum and leases the assets back over time. Sale and HP back options are also available. This form of equipment refinancing is offered through Portman.

Soft assets are generally assets which typically have little or no re-sale value. They may not be designed to be held onto for a long term and can include assets which are intangible, such as software.

Software as a Service (SaaS) is a business model where software or digital product is accessed by users over the internet, typically on a subscription basis. This approach eliminates the need for customers to install, maintain, or update software on their own devices, as these tasks are managed by the provider.

In business finance, SaaS companies often rely on predictable, recurring revenue streams. Financing options like venture capital, revenue-based financing, or merchant cash advances can help these businesses scale operations, invest in product development, and optimise customer acquisition strategies.

Example SaaS Business Platforms: Slack, Zoom, Salesforce

A sole trader is an individual who owns and operates a business alone, taking full responsibility for its management, profits, and liabilities. This business structure is simple to set up and offers the owner complete control, but the owner is personally liable for all debts and obligations of the business.

If you are a Sole Trader or Partnership and looking for business finance, visit Portman Financial Services to enquire online.

SONIA (Sterling Over Night Indexed Average) | SONIA is an interest rate that applies to overnight borrowing in British Pounds. It’s based on actual transactions between banks and other financial institutions, and is considered risk-free because it doesn’t include any credit risk from the borrower. SONIA is expected to become the new standard interest rate used in global financial markets, replacing LIBOR.

When a lease is arranged for assets that require a specific payment structure to the supplier (this could be due to installation and quality control), the agreement may specify that payments are to be released to the supplier in stages following written instruction from the lessee.

Stockholding within business finance can have two meanings:

1. Owning shares in a company – This is the most common meaning. When you buy stock in a company, you become a shareholder. You’re essentially owning a tiny piece of that company. Shareholders have certain rights, like voting on company decisions and receiving profits (dividends) if the company does well.
2. Inventory – This is less common, but sometimes “stockholding” refers to the physical inventory a business holds. This could be raw materials they need for production, finished goods ready for sale, or even office supplies.

So, depending on the context, ‘stockholding’ could refer to your investment in a company (shares) or the company’s own inventory of goods.

Structured finance is essentially a tailor-made loan designed for your specific needs. Instead of a traditional loan based on credit history, it looks at the bigger picture, including your business assets (property, equipment, invoices) to create a flexible funding solution. This can unlock more capital for your business than a standard loan.

Any type of business whose main function is to sell equipment, including resellers and dealers. They can sometimes offer vendor finance to their customers, which can be arranged by manufacturer or distributor schemes, or organised through a broker or with a lessor directly. Other terms include vendor or vendor partner. Portman can offer vendor finance for providers of equipment & services.

In business finance, a syndicated deal refers to a collaborative financing structure where multiple lenders come together to provide a significant loan to a single borrower. This approach benefits both sides:

• Borrower – They gain access to a larger pool of capital than a single lender could offer, potentially securing more favorable loan terms and rates.
• Lenders – They share the inherent risk associated with a large loan, mitigating potential losses if the borrower defaults.

Additionally, syndication allows lenders to participate in financing opportunities that might exceed their individual lending capacity. A lead bank, often called the arranger or lead lender, manages the process. They structure the deal, attract other lenders to participate, and handle administrative tasks. This lead bank may contribute a larger portion of the loan themselves or take on a more active role in managing the syndicate.

A tangible asset is a physical item of value owned by a business or individual that can be touched, seen, or measured. Tangible assets, also known as hard assets.
Examples include: buildings, machinery, equipment, vehicles, and inventory.
These assets are essential to operations, have a clear market value, and can be sold or used as collateral for loans.

The non-cancellable agreed period of a finance agreement.

Total Cost of Ownership (TCO) is the overall expense of owning and operating an asset over its entire lifespan. It goes beyond the initial purchase price to include factors like maintenance, repairs, energy consumption, and even disposal costs.

An Example – When buying a car includes not only the purchase price but also costs for fuel, insurance, repairs, and potential resale value. By considering TCO, businesses can make informed decisions about long-term investments.

In business finance, tranches are essentially slices of a larger financial instrument, like a loan or a pool of assets. Imagine cutting a pie into sections – each section is a tranche.

Each tranche can have different characteristics, like:

• Risk – Some tranches are considered riskier than others.
• Return – Riskier tranches typically offer higher interest rates.
• Maturity – Tranches may have different payback timelines.

This allows financiers to create products that appeal to a wider range of investors, with varying risk appetites. It’s a common strategy in products like mortgage-backed securities.

The decision process of whether a prospective customer should be offered finance. This is done through a risk assessment and credit check to determine the affordability of the proposed finance for the customer.

A lease agreement used by brokers or equipment suppliers which typically has the branding of the broker or supplier. This document will be acceptable by several lessors and can provide a simpler process for customers where a broker or supplier has a number of funders on their panel.

The process of determining the current or projected worth of a financial asset, such as a stock, bond, or property. Valuation methods may include analysing market trends, future cash flows, risk factors, and other financial metrics to estimate its fair value.

A form of consumption tax on a product. For leases without a bargain purchase option, VAT on an asset is charged on the rental payments. For hire purchase agreements, VAT is paid upfront.

A term used to describe goods or services that are not subject to Value-Added Tax (VAT). This means that businesses selling these items do not need to charge or collect VAT from their customers.

Financial solutions, most often leasing, offered by vendors to their customers that is not manufacturer (captive) finance. The vendor introduces the customer to either a broker or funder. Around a quarter of total new asset finance business in the UK market is sold through the vendor channel.

Venture Capital is a form of private equity financing provided by investors to startups or early-stage companies with high growth potential. Venture capital typically involves funding in exchange for an equity stake in the business. This type of capital is often used to help companies scale operations, develop products, or enter new markets, with the expectation of significant returns if the business succeeds. Venture capital investors also often provide strategic guidance and mentorship in addition to financial support.

The difference between a company’s current assets (such as cash, inventory, and accounts receivable) and its current liabilities (such as accounts payable and short-term debts), representing the funds available for day-to-day operations.

(Extended Internal Rate of Return) XIRR is a way to measure how much an investment has earned over time, taking into account the exact dates when money was added or taken out. Unlike other methods that assume transactions happen regularly, XIRR works with investments where money comes in or out at different times. This makes it a more accurate way to calculate returns for investments like mutual funds or portfolios.

Yield is the return on an investment. It’s like the reward you get for putting your money into something, such as stocks, bonds, or savings accounts. This reward can come in the form of:

• Interest: Money earned on your investment over time.
• Dividends: Payments made by a company to its shareholders.
• Capital gains: The profit you make when you sell an investment for more than you paid for it.

In simpler terms, yield is how much you get back from your investment compared to how much you put in.