Glossary
Financial terms, defined in plain English.
Lending terms
- Amortisation — repaying a loan gradually through regular instalments rather than in one lump
- Bullet repayment — a facility where the whole principal is repaid at the end
- Covenant — a condition in a loan agreement you must keep meeting, such as a minimum interest cover
- Interest cover — how many times over the income from an asset covers the interest on the debt against it
- Loan-to-value — the loan as a percentage of the asset value
- Bridging — short-term borrowing with a defined exit, usually a sale or a refinance
Trade terms
- Letter of credit — a bank undertaking to pay a seller once shipping documents are presented
- Standby letter of credit — a guarantee that only pays out if something goes wrong
- Invoice discounting — borrowing against unpaid invoices
- Confirmation — a second bank adding its own promise to another bank's letter of credit
Investment terms
- Discretionary — you delegate the decisions to the manager, within a written mandate
- Advisory — the manager recommends, you decide
- Mandate — the written document setting objectives, horizon and constraints
- Rebalancing — returning a portfolio to its target weights after markets have moved it
Fund finance terms
- Subscription line — borrowing secured on investors' uncalled commitments
- NAV facility — borrowing secured on the value of a fund's portfolio
- Uncalled commitment — money investors have promised but not yet paid in
