Franchise Loan Glossary

Capital: Money invested in a franchise or other business.
Collateral: An asset used to secure a loan. If a borrower defaults on a loan, the asset they pledged becomes the possession of the lender.
Direct Franchisor Financing: When a franchisor acts as a lender and loans money directly to a franchisee.
Guarantor: A third party who pledges to reimburse a lender if a borrower defaults on a loan.
Guaranty: A pledge by a third party to reimburse a lender if a borrower defaults on a loan.
Indirect Franchisor Financing: When a franchisor helps a franchisee find funding from a third-party lender.
Interest: The fee charged to a borrower for the right to borrow a lender’s money.
SBA: The Small Business Administration is an independent agency of the executive branch of the United States government. It assists franchises and other small businesses by sponsoring a variety of loan programs.
Term: The period of time that a contract, such as a loan, is active.
Term Loan: A loan, given in a lump sum, which is repaid through regular payments.