Welcome to the Alternative Funding Group Business Funding Glossary. This technical reference manual is designed to provide business owners, brokers, and industry researchers with precise definitions of alternative finance terminology, underwriting standards, and receivables-based funding structures.
The following terms are organized alphabetically to ensure clarity and topical accuracy for financial evaluation and decision-making.
Alternative Business Funding
Alternative business funding is a category of non-bank capital solutions that provide businesses with funding based primarily on revenue, cash flow, and operating performance rather than traditional credit-based underwriting. These solutions are commonly offered by a direct lender and are used for short-term liquidity and growth.
Approval Amount
The approval amount is the maximum funding amount a business qualifies for based on underwriting results, including revenue, cash flow stability, and existing obligations. Approval criteria may differ when working directly with a direct lender.
Average Monthly Revenue (AMR)
Average Monthly Revenue (AMR) is a metric representing a business’s average monthly income over a defined evaluation period. AMR is a primary driver of approval size and remittance structure.
Business Funding
General term for capital provided to companies to support operations or growth. Many businesses obtain business funding when bank financing is unavailable or impractical.
Buy Rate
The buy rate is the base pricing offered by a funding provider to an ISO before commissions, fees, or markups are applied.
Cash Flow Underwriting
Cash flow underwriting is an evaluation method that assesses deposits, expenses, revenue consistency, and account behavior rather than relying primarily on credit score. This approach is foundational to business funding.
Commission
Commission is compensation earned by ISOs or affiliates for successfully funded transactions.
Conditional Approval
A conditional approval indicates that a business is eligible for funding once specific requirements are satisfied, such as document verification or revenue clarification.
Credit Score (Contextual)
A credit score is a numerical representation of personal or business credit history. In alternative funding, credit score is typically a secondary factor, with greater emphasis placed on revenue trends and cash flow, particularly when working with a direct lender.
Factor Rate
A factor rate is a fixed multiplier used to calculate the total purchased amount in a receivables-based funding transaction. Factor rates do not compound and are not expressed as APR.
