APR
The annual Percentage Rate of Charge. This is the true cost of orrowing as in includes all the charges that have to be paid to obtain credit - for example, the arrangement fee for a loan and any legal charges. The general rule is : the lower APR, the better the deal. The APR is used in regulated consumer credit advertisements - that is, for personal borrowing up to £25,000 for all residential mortgages. Also see EAR.

ASSURANCE
The protection against something that will eventually happen bu at a date unknown - e.g. death.

BACS
Bankers Automated Clearing System. Used for making payments such as salaries and other regular sums, as well as for collecting dues by direct debit.

BASE RATE
A rate of interst used by banks for settling the rates the charge / pay their customers. Business customer rates are often expresses as a margin over the base rate.

CAPITAL GROWTH
Investing with the objective of achieving an increase in capital as opposed to an income.

CAPITAL REPAYMENT HOLIDAY
An arrangement whereby a lender allows a borrower to make make interest-only payments on a loan for a specific period of time. As there is no repayment of the capital during this period, the borrower enjoys lower payments.

CHAPS
A UK electronic system for transferring funds between bans for same-day clearing.

CHARGE
Normally a legal interest in land or property created in favour of a creditor - example, a mortgage.

CONSUMER CREDIT ACT
A UK Act of Parliament that received Royal Assent in 1974. Its object is to protect consumers, including sole traders and partnerships when borrowing money.

CORRESPONDENT BANK
A bank that offers facilities to customers of a bank in another country. Often the arrangements are reciprocal between two banks. Facilities relating to money transmission are those most frequently encountered.

COVENANT
A promise given by the borrow in a facility letter that certain acts will be performed or refrained from. They typically related to such matters as working capital, debt-equity rations and dividend payments. The covenants are designed to protect the lenders interest.

CREDIT SCORING
A statistical technique used by banks and other financial instutions that removes all personal bias from the decision on whether to lend money. It works by identifying and allocating scores for various characteristics. For business customers this may include the nature of this business and the number of years it has been established. Usually there are between eight and twelve characteristics. The pass figure is based on the lenders past experience.

CREDIT SEARCH
Before opening an account or lending money, most banks conduct a search at a credit reference agency. The agencies gather information from a wide range of sources including the county courts, bankruptcy proceedings, finance companies and professional debt collectors.

DECRESING TERM ASSURANCE
A policy over a borrowers life. The sum assured decreases over time in line with the panned reductions in the outstanding debt.

DRAWDOWN
Withdrawal of funds from a loan account.

DRAWER
The person that originates a cheque of bill of exchange.

EAR
Equivalent Annual Rate. This is used in place of the APR for overdraft as per the Consumer Credit Act. Regulations stipulate that the APR for this for of credit includes intents only and not any feeds connected with arranging the overdraft or for operating the account.

ECGD
Abbreviation for Export Credit Guarantees Department. A UK Government organisation that encourages exports by making export credit insurance available to UK exporters and guaranteeing repayment to UK banks that provide credit to exporters on credit terms of two years or more.

ENDORSEMENT
1. Signing the reverse of a cheque or bill of exchange so as to transfer ownership.
2. An amendment to an insurance policy or cover not recording a change in the terms of assurance.

EQUITY
A term used to describe the net investment of owners in a business - i.e. the result of an assets less liabilities calculation of a business. Also often used to describe the difference between the value of an asset (e.g. a property) and the debt attached to the asset (e.g. Mortgage)

FACILITY LETTER
A document issued by a bank that details the terms and conditions of a loan.

FACTORING
The purchase of trade debts (invoices), by a facot that provides a business with cash. The factor assumes the role of debt collector and accepts the credit risk.

FATE
The fate of a cheque of bill of exchange is whether it has or has not been paid.

FIXED ASSETS
Assets that a business is expect to use for a considerable period e.g. Land, buildings, plant machinery and vehicles.

FIXED RATE
Some savings and loans are tied at the same rate of interest throughout a given period.