Financial Terms you need to know as an entrepreneur.

Running a business, whether big or small, comes with constant learning. The learning does not stop at any point.

You cannot run a successful business if you do not know and understand some of the important aspects of your business. 

Understanding the different aspects of running a business calls for knowing and understanding the terms used in these business processes. From product development to marketing, to finance, to customer service. 

Finance is a very crucial aspect of any business and any new entrepreneur or veteran entrepreneur can tell you that. Financial terms change from time to time and it’s important to keep learning and stay updated. 

However, here are some terms you need to know. 

1.Cash Flow 

This refers to the money that flows into and out of your business to keep it running. Positive cash flow indicates that the company has enough cash on hand to cover ongoing expenses. This necessitates a complex balancing act and is frequently an entrepreneur’s lifeline in terms of funding expansion and responding to ever-changing factors.


An asset is something of value owned by a business or by its owner. Most small business loan providers need you to prove assets that can be used as collateral for loans secured by them. 


Collateral is a type of asset that a borrower might use to qualify for a secured loan. In the event that a borrower fails to meet their obligations under a secured loan, the lender has the right to seize these assets. 

4.Gross profit

This is the overall profit from selling your products or services after deducting the costs of doing so. It is sometimes expressed as a percentage. 

5.Fixed cost

This refers to the cost of the funding while applying for a cash advance.  This one does not change over time.

6.Credit score

When it comes to unsecured cash advances and loans, financing companies frequently conduct a “credit check” on the business owners who will be liable for repaying the funds. 


A loan is a type of credit product that has a fixed interest rate and repayment period.

8.Secured loan

A financial product that requires the borrower to pledge assets as collateral to protect the company from defaulting on its payments.


This refers to the time it takes to repay a financing provider for the total amount borrowed. A ‘fixed-term loan’ is one that has a set term. Alternatively, it could be flexible, which allows funds to be repaid in accordance with the business’s revenue and hence employs an expected repayment period.

10.Cash advance

Cash advance: A type of loan that has a set fee for accessing funds but also has relatively flexible payback periods and fewer qualification requirements.

11.Interest Rate

This is the rate that is owed on an amount lent over a specified period, and it is also stated as a percentage e.g 12%. 

The difference between a loan and a cash advance is that a cash advance has no interest. There is a set fee for accessing funds that do not alter over time. A loan, on the other hand, has an interest rate that changes in response to external events.


Failure to meet the agreed-upon terms of a cash advance or loan is referred to as a default.