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Business Terms Glossary

A​

Accrued Interest​

Interest that has accumulated on a loan but has not yet been paid. Calculated daily based on the outstanding principal, interest rate, and day count convention.

Admin Agent​

The administrative agent responsible for managing the loan on behalf of the lenders. Handles payment processing, documentation, and coordination between borrowers and lenders.

All-In Rate​

The total interest rate on a loan, including the base rate plus margin/spread. For example, if SOFR is 5.25% and margin is 2.50%, the all-in rate is 7.75%.

Amortization​

Scheduled principal repayment over the life of a loan. Can be structured as equal installments, declining balance, or custom schedule.

Assignment​

Transfer of a lender's full rights and obligations under a credit agreement to another party. The assignee becomes the lender of record.

Assignment Fee​

Fee charged for processing an assignment of a loan position, typically paid by the buyer, seller, or split between parties.

B​

Base Rate​

The floating interest rate index (e.g., SOFR, PRIME, EURIBOR) upon which loan interest is calculated. The base rate plus margin equals the all-in rate.

Borrower​

The entity receiving credit under a loan facility. Must meet eligibility criteria and comply with loan covenants.

Bullet Loan​

A loan where the entire principal is due in full at maturity with no amortization during the loan term.

C​

Commitment​

The amount a lender has agreed to lend under a facility. Represents the maximum exposure for the lender.

Commitment Fee​

Fee charged on the unused portion of a revolving credit facility. Calculated as: Unused Amount × Fee Rate × Days/360.

Conversion​

Changing a loan's interest rate basis, such as converting from SOFR to Prime or from floating to fixed rate.

CUSIP​

Committee on Uniform Securities Identification Procedures number - a unique nine-character identifier for securities and financial instruments.

D​

Day Count Basis​

The method used to calculate the number of days for interest accrual:

  • 30/360: 30 days per month, 360 days per year
  • Actual/360: Actual days divided by 360
  • Actual/365: Actual days divided by 365
  • Actual/Actual: Actual days divided by actual days in year

Deal​

A credit agreement between a borrower and syndicate of lenders, containing one or more facilities. The master agreement governing the lending relationship.

Delayed Draw Term Loan (DDTL)​

A term loan facility that can be drawn over a specified commitment period rather than funded immediately at closing.

E​

EURIBOR​

Euro Interbank Offered Rate - the interest rate benchmark for euro-denominated loans, available in various tenors (1W, 1M, 3M, 6M, 12M).

F​

Facility​

A credit line or loan tranche within a deal. Common types include Revolver (RCF), Term Loan A (TLA), Term Loan B (TLB), and Letter of Credit (LOC).

Fronting​

When one lender provides credit on behalf of other lenders, who then participate in the exposure. Common in letter of credit facilities.

G​

Guarantor​

An entity that guarantees repayment of a borrower's obligations. Provides additional credit support for the facility.

H​

Holiday Calendar​

Set of non-business days used to adjust payment dates and calculation periods. Can be location-specific (NYSE, London, etc.).

I​

Index Rate Option (IRO)​

A specific base rate with defined tenor used for interest calculations. Examples: 1-Month SOFR, 3-Month EURIBOR, Prime Rate.

Interest Period​

The period over which interest accrues before payment or rate reset. Common periods are monthly, quarterly, or semi-annually.

ISIN​

International Securities Identification Number - a 12-character global security identifier used internationally.

L​

Letter of Credit (LOC)​

A contingent credit facility where the bank guarantees payment to a beneficiary if certain conditions are met. Used for trade finance and performance guarantees.

LIBOR​

London Interbank Offered Rate - legacy interest rate benchmark being phased out and replaced by risk-free rates like SOFR.

Loan​

An individual borrowing under a facility with specific terms, maturity, and interest rate. Multiple loans can exist under one facility.

LXID​

Loan X Identifier - a unique loan identification number used in the syndicated loan market.

M​

Margin​

The spread over the base rate that determines the total interest rate. Also called spread. Expressed in basis points or percentage.

Maturity Date​

The date when a loan or facility terminates and final payment is due. No further borrowing is permitted after maturity.

N​

Non-Pro-Rata​

Allocation method where lenders have different percentage shares rather than proportional sharing. Used in complex structures.

P​

Participation​

Economic exposure to a loan without direct lender rights. The participant shares in the economics but the original lender remains the lender of record.

Payment-in-Kind (PIK)​

Capitalization of accrued interest to principal rather than cash payment. Increases the loan balance instead of requiring cash outflow.

Paydown​

Principal payment that reduces outstanding loan balance. Can be mandatory (scheduled) or voluntary (prepayment).

PIK Toggle​

Option for borrower to choose between paying interest in cash or capitalizing it as PIK. Provides payment flexibility.

Precedent Date​

The date from which interest begins accruing on a loan. Usually the funding date or effective date of the loan.

Prepayment​

Voluntary principal payment ahead of scheduled maturity or amortization. May be subject to prepayment penalties.

Pricing Grid​

Tiered pricing structure where margin varies based on leverage ratios, credit ratings, or other metrics. Provides automatic rate adjustments.

Prime Rate​

Base interest rate used by banks, typically for higher-quality borrowers. Published daily by major banks.

Principal​

The outstanding loan amount excluding interest. The base amount on which interest is calculated.

Pro-Rata​

Allocation method where lenders share proportionally based on their commitments. Standard method for syndicated loans.

R​

Revolver (RCF)​

Revolving Credit Facility that can be borrowed, repaid, and reborrowed during the commitment period. Provides working capital flexibility.

Rollover​

Extension or renewal of a loan at maturity, possibly with modified terms. Can include partial principal payment.

Rounding​

Method for rounding interest calculations to specified decimal places. Options include nearest, up, down, or to specific precision.

S​

Settlement​

The completion of a trade transaction with transfer of positions and cash payment. Includes documentation and wire transfers.

SOFR​

Secured Overnight Financing Rate - the replacement for USD LIBOR. Based on Treasury repurchase agreements.

Spread​

See Margin - the additional interest rate charged over the base rate.

Sublimit​

A limit on borrowings by specific borrowers or for specific purposes within a facility. Examples include borrower sublimits and swing line sublimits.

Swing Line​

A short-term borrowing subfacility for immediate funding needs, typically overnight or very short term.

Syndication​

Distribution of a loan among multiple lenders to spread risk and increase lending capacity.

T​

Term Loan​

A loan with a defined maturity date and typically scheduled amortization. Common types include Term Loan A (TLA) and Term Loan B (TLB).

Trade​

A secondary market transaction involving the sale/purchase of a loan position between lenders.

U​

Utilization​

The percentage of a facility's commitment that has been borrowed. Calculated as: Outstanding ÷ Commitment × 100%.

Unused Fee​

Alternative to commitment fee, charged on the undrawn portion of a credit facility.

W​

White Label Agent​

An agent that provides administrative services under another entity's brand. Common in private credit markets.

Wire Instructions​

Banking details for sending payments including:

  • Beneficiary bank name and address
  • ABA/Routing number (US)
  • SWIFT/BIC code (International)
  • Account number and name
  • Reference information
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Last updated: November 2024