The Ultimate Fintech Glossary for Founders Raising Capital

Navigating the fintech landscape can be overwhelming — especially if you didn’t “grow up” in finance.

To bring greater awareness and accessibility to the lesser-known terms and strategies that shape this space, I’ve pulled together a glossary of 200+ concepts I’ve personally worked with over the course of my 15-year career in the financial sector.

Use it often.

Share it freely.

No gatekeeping here. :)

Focus Areas:

A. Fintech Foundations

B. Regulatory Environment

C. Credit Risk

D. Lending Lifecycle

E. Capital Stack

F. Fundraising

G. Performance Metrics

H. Financial Statements

I. Fundraising Pathways

J. Risk Concentration

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A. Fintech Foundations & Technology

Core concepts for building and operating digital financial solutions.

FinTech

Short for Financial Technology.

Refers to the use of innovative technology to improve, automate, and deliver financial services — spanning digital payments, lending platforms, neobanks, and blockchain applications.

Autonomous Finance

Technology-driven financial systems that make decisions or take actions on behalf of users with minimal human input. Powered by AI, machine learning, and real-time data, autonomous finance automates tasks like budgeting, investing, loan approvals, and payments.

In fintech, this can include:

• Auto-savings tools that transfer small amounts based on spending patterns

• AI-driven underwriting that adjusts credit limits dynamically

• Robo-advisors offering automated investment portfolios

• Autonomous bill payment or subscription management

This approach reduces friction for users and improves operational efficiency — especially in consumer-facing fintech or embedded finance models.

AgTech / HealthTech / EdTech

Sector-specific branches of innovation through technology.

• AgTech: Technology applied to agriculture to enhance productivity, sustainability, and food systems.

• HealthTech: Tools and platforms improving healthcare delivery, access, diagnostics, and outcomes.

• EdTech: Digital innovations that enhance education, including virtual classrooms, learning apps, and AI tutoring systems.

API (Application Programming Interface)

A set of tools and protocols that allow different software systems to communicate and exchange data — essential for integrating banking systems, wallets, or lending platforms.

Microfinance

A financial services model that provides small loans, savings accounts, insurance, and other products to individuals or small businesses typically excluded from traditional banking — especially in low-income or rural communities.

Fintechs operating in microfinance often leverage mobile technology, alternative data, and local agents to reduce costs and expand reach. Key features include:

• Small loan sizes (often <$1,000)

• Group lending models (e.g., joint liability)

• High-touch repayment cycles

• Social impact metrics (e.g., women-led, agriculture)

Microfinance plays a vital role in financial inclusion and is often the first formal financial product for underserved populations.

Open Source

Software with publicly available source code that can be modified and distributed. Open-source tools power many fintech infrastructure innovations by reducing development costs and promoting collaboration across global developer communities.

UX / UI

• UX (User Experience): How a user feels while interacting with a product or service — focused on usability, flow, and satisfaction.

• UI (User Interface): The visual elements and layout through which users interact with a digital product — buttons, menus, dashboards, etc.

Data Analytics / Data Infrastructure

• Data Analytics: The process of analyzing raw data to extract insights that inform decisions, detect trends, or predict behavior.

• Data Infrastructure: The foundational systems (cloud storage, databases, pipelines) that store, process, and secure an organization’s data.

BaaS (Banking-as-a-Service)

A model where licensed banks provide core banking infrastructure — such as account creation, payments, KYC (Know Your Customer) / AML (Anti-Money Laundering) compliance, and card issuance — via APIs to non-bank businesses. This enables fintechs, retailers, and platforms to launch branded financial products without becoming a bank themselves.

Common BaaS applications include:

• Neobank apps (e.g., Chime, which uses Bancorp Bank for account infrastructure)

• Gig worker platforms offering instant payout wallets or debit cards (e.g., Uber’s GoBank integration)

• Retail brands launching debit cards or loyalty wallets (e.g., Starbucks or Walmart MoneyCard)

• Lending startups embedding credit products without holding a banking license

• Vertical SaaS platforms enabling embedded payments and banking for users (e.g., Shopify Balance)

BaaS allows faster go-to-market, lowers regulatory burden for fintechs, and promotes innovation in underbanked and niche markets.

Virtual Wallet / Mobile Wallet / Paycards

• Virtual Wallet: A software-based system that stores users’ payment details for digital transactions.

• Mobile Wallet: A type of virtual wallet accessed via smartphones (e.g., Apple Pay, Cash App).

• Paycards: Reloadable prepaid debit cards, often used by employers to pay wages to unbanked workers.

Parent Accounts / Child Accounts

A wallet hierarchy that enables structured control over multiple users and transactions within a digital finance system.

• Parent Account: The primary virtual wallet with authority over one or more linked child accounts. It can fund, restrict, and monitor activity across child wallets. Common use cases include employers, cooperatives, nonprofits, or diaspora senders managing distributed payouts or spend controls.

• Child Account: A sub-wallet tied to the parent account. It holds allocated funds and operates under rules set by the parent — such as spending limits, allowed vendors, or withdrawal permissions. Child accounts are often used by field agents, family members, contractors, or grant recipients.

This structure is essential for complex remittance models and controlled disbursements. It enables:

• Real-time oversight of distributed funds

• Programmable payment rules across wallets

• Automated sweeps, restrictions, and conditional payouts

• Multi-tiered compliance and auditability

Custodian Account

A financial account where assets are held by a third-party institution (the custodian) on behalf of another party — typically for safekeeping, compliance, or operational structuring.

In fintech, custodian accounts are often used to separate user funds from platform funds, ensuring regulatory protection and building trust. For example, in wallet-based systems, a licensed bank or custodian might hold pooled customer balances while the fintech manages user interfaces and transactions.

When paired with Parent / Child Account structures, custodian accounts ensure that funds flow through regulated rails, while enabling fintechs to set payment rules, spending limits, or user roles without directly holding customer money.

This structure is crucial in BaaS and embedded finance models to stay compliant while scaling responsibly.

Interoperability

The ability of different platforms, systems, or financial networks to connect and work together. In fintech, interoperability is essential for mobile wallets, payment processors, and remittance platforms that aim to reach users across fragmented infrastructures.

Processing Fees 

Charges incurred for executing payments, typically levied by payment gateways, merchant acquirers, card networks, or banks. These fees compensate intermediaries for the infrastructure and services required to authorize, route, and settle transactions.

Processing fees are usually structured as a percentage of the transaction (e.g., 2.9%) plus a flat fee (e.g., $0.30), and can vary based on payment method (credit card, ACH, digital wallet), risk level, currency conversion, or volume.

For fintechs, processing fees materially affect unit economics — especially in high-frequency or low-margin models. Founders must understand these costs when designing pricing, negotiating partner contracts, and evaluating profitability by channel or product.

Examples:

• Stripe or Square fees for card payments

• ACH transfer costs via a BaaS provider

• FX conversion markups on cross-border payments

Fintechs may choose to absorb, share, or pass these fees on to end users, depending on business model and regulatory considerations.

Pay-as-You-Go (PAYG)

A flexible payment model where users are charged only for what they use, often seen in mobile money, utilities, or software services. Common in emerging markets, PAYG models improve affordability and accessibility for low-income or underserved users.

Rent-to-Own

A financing arrangement where users make recurring payments toward ownership of an asset (e.g., equipment, solar panels, appliances). Common in last-mile fintech models, this structure enables access to essential goods without requiring full upfront payment.

Buy Now, Pay Later (BNPL) Considerations

Key financial, regulatory, and operational factors fintechs must evaluate when offering installment-based payment options at the point of sale.

BNPL models allow consumers to split purchases into smaller payments over time — often interest-free to the customer but monetized via merchant fees or financing charges. While attractive for user acquisition and merchant conversion, BNPL offerings come with complex dynamics that founders must manage:

Core considerations include:

• Credit Risk: Assessing repayment capacity, especially for thin-file or unbanked users.

• Underwriting: Whether to approve based on real-time data, credit bureau info, or behavioral analytics.

• Compliance: Varies by country — including consumer protection, disclosures, and lending licenses.

• Capital Requirements: Need for warehousing capital, lender partnerships, or balance sheet exposure.

• Fraud & Identity: Fast checkout means higher fraud risk without strong KYC (Know Your Customer) / KYB (Know Your Business) safeguards.

• Collections & Recovery: Designing humane, effective repayment structures and workflows.

• Merchant Economics: Balancing merchant discount rates (MDRs) with uptake and profitability.

BNPL is a hybrid of credit and payments — and success requires thoughtful design of both.

Remittance

A transfer of money — usually by a foreign worker — to an individual in their home country. Remittances are a vital source of household income in many regions, and fintech platforms often streamline these transfers for lower fees and faster delivery.

Cross-Border

Refers to financial services or transactions that move across national boundaries. Cross-border fintech products must address regulatory compliance, foreign exchange, anti-money laundering (AML), and settlement challenges.

Cross-Currency

The exchange or movement of funds between different currencies in a single transaction. Fintechs offering cross-currency products must manage foreign exchange risk, liquidity access, and pricing transparency.

Social Capital

The value derived from relationships, trust, and networks within a community or business ecosystem. In fintech, social capital can influence:

• Creditworthiness (e.g., peer endorsements in group lending)

• User acquisition (e.g., referral-based growth in informal markets)

• Platform trust (especially when serving unbanked or underbanked users)

Fintech models that succeed in last-mile or community-centered contexts often build on local trust networks, village agents, or cooperative structures — turning social capital into a tangible business advantage.

Last Mile

The final stretch of service delivery to end-users, particularly those in remote, rural, or underserved areas. In fintech, “last mile” refers to the critical infrastructure, human networks, and localized strategies needed to reach customers who are often excluded from traditional financial systems.

Key components of last-mile fintech models include:

• Agent networks (e.g., booking agents or mobile money operators)

• Offline functionality (e.g., USSD-based platforms)

• Cultural and language adaptation

• Cash-in/cash-out touchpoints

Success in the last mile often hinges on building trust, simplifying user experiences, and integrating with local livelihoods.

Booking Agents 

Individuals embedded in fragmented or informal markets who onboard and support new users onto fintech or tech-enabled platforms. Commonly found in last-mile ecosystems, they leverage trusted local relationships to help customers overcome technology and financial literacy barriers. Booking agents often assist with account setup, transaction initiation, or service education, and are typically compensated via commissions per successful “booking” (e.g., a completed transaction, service use, or platform engagement).

Scope of Work

A detailed document that outlines the objectives, deliverables, timelines, and responsibilities for a specific project or engagement. In fintech and startup settings, it is commonly used to hire talent or contractors with predefined milestones tied to payment schedules. A well-crafted SOW includes guardrails to manage expectations, reduce ambiguity, and ensure accountability — protecting both the client and the service provider from scope creep or misalignment.

Accounting

The structured process of recording, classifying, and summarizing financial transactions to produce reports that reflect the financial health and performance of a business.

For fintech founders, strong accounting practices are essential for:

• Understanding cash flow and burn rate

• Demonstrating profitability and growth to investors

• Meeting regulatory and tax obligations

• Supporting audits, due diligence, and capital raises

Modern fintechs often use cloud-based platforms (like QuickBooks, Xero, or NetSuite) and integrate real-time data from APIs, banking partners, and payment processors.

Founders should establish a Chart of Accounts, set consistent reporting periods, and ensure clarity in their income statement, balance sheet, and cash flow statement. As companies grow, accounting supports more advanced needs like cost allocation, revenue recognition, and financial modeling.

Chart of Accounts

A standardized list of financial accounts used to categorize every transaction in a business. It forms the backbone of accounting, enabling accurate financial reporting, audit readiness, and operational transparency.

A well-structured chart of accounts also plays a critical role in stress testing — especially for financial institutions or fintechs managing credit portfolios. By tagging income, expenses, and assets at a granular level, organizations can simulate the impact of macroeconomic shocks (e.g., interest rate hikes, inflation, currency shifts) on specific account types or business units. This allows for more targeted risk modeling based on the sensitivities of individual accounts, helping strengthen resilience and inform contingency planning.

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B. Regulatory & Compliance Environment

Terms that help you navigate the legal and operational landscape.

Regulated Industry

An industry that operates under oversight from government agencies or independent regulators to ensure compliance with laws, protect consumers, and maintain market integrity.

In fintech, this includes banking, payments, lending, and securities — all subject to licensing, reporting, and conduct standards.

Consumer Financial Protection Bureau (CFPB)

A U.S. federal agency created to protect consumers in financial markets. It enforces laws against deceptive practices and ensures transparency in lending, credit reporting, debt collection, and banking services.

Fintechs offering financial products in the U.S. must understand CFPB rules on disclosures, consent, data handling, and customer redress.

Federal Reserve Banks

In the U.S., the Federal Reserve Banks are twelve regional institutions that operate under the U.S. Federal Reserve System. They manage monetary policy implementation, supervise commercial banks, and facilitate critical financial services like ACH transfers, Fedwire settlements, and liquidity support.

But globally, every country typically has a central or reserve bank that performs similar functions — such as:

• Monetary policy and inflation control

• Licensing and supervision of financial institutions

• Settlement and clearing of national payments systems

• Currency issuance and financial stability oversight

Examples include:

• European Central Bank (ECB) for the Eurozone

• Bank of England (BoE) in the UK

• Reserve Bank of India (RBI)

• South African Reserve Bank (SARB)

• Central Bank of Nigeria (CBN)

• Banco Central do Brasil (BCB)

Why it matters for fintech founders: If your business touches money movement, credit issuance, or deposit-like products, you must understand how to comply with your country’s reserve bank rules — or work with a regulated partner who does. This includes registration, reporting, capital requirements, and participation in national payment systems (e.g., PIX in Brazil, NIBSS in Nigeria, SEPA in Europe).

Money-Laundering

The process of concealing the origin of illegally obtained funds by moving them through legitimate financial systems — often in multiple layers — to make the money appear lawful.

Fintechs that handle payments, remittances, credit, or wallet services must implement Anti-Money Laundering (AML) programs to identify and prevent suspicious activity.

This includes KYC (Know Your Customer), which is the process of verifying a user’s identity and assessing their risk profile before allowing access to financial services. This often involves collecting and validating government-issued IDs, proof of address, and personal details to ensure compliance with national laws and prevent fraudulent activity.

Failure to comply with AML and KYC regulations can lead to fines, product shutdowns, and legal sanctions — especially in cross-border operations.

Risk / Return Analysis

A core financial assessment used to evaluate whether the potential reward of an investment or decision is worth the associated risk. In fintech, this analysis helps founders:

• Price financial products (e.g., loans, insurance, BNPL)

• Evaluate customers' creditworthiness

• Assess strategic decisions (e.g., expanding to a new market or onboarding a high-risk partner)

• Design investor decks that demonstrate upside while managing downside scenarios

The analysis typically weighs:

• Return: Expected profit (e.g., interest income, transaction fees, equity upside)

• Risk: Potential for loss (e.g., default rates, fraud, regulatory fines, reputational harm)

Strong risk/return analysis involves stress testing, sensitivity modeling, and aligning products with the company’s overall risk appetite. For regulated fintechs, it also supports compliance with capital adequacy and credit policy requirements.

Regulatory Environment

The ecosystem of laws, agencies, policies, and enforcement mechanisms that govern financial activity.

Fintechs must assess this environment when launching in new geographies or sectors — from licensing and data privacy laws to consumer protections and capital requirements.

ISDA (International Swaps and Derivatives Association)

A global trade group that creates standardized legal frameworks for derivatives contracts.

The ISDA Master Agreement is the default legal structure for over-the-counter (OTC) derivatives, helping financial firms manage credit exposure, collateral, and dispute resolution in complex trades.

Insurance Coverage

A financial safeguard that transfers risk from a fintech (or its customers) to an insurance company. Common types include:

• Professional liability (for fraud, tech errors)

• Cybersecurity insurance

• Loan default insurance

• Deposit insurance (if partnering with banks)

Used to enhance trust, mitigate risk, and satisfy regulatory or investor requirements.

Legal Counsel / Side Letter / Engagement Letter

• Legal Counsel: Attorneys or firms that advise fintechs on contracts, compliance, transactions, IP, and dispute management.

• Side Letter: A supplemental agreement that modifies or clarifies terms in the main contract — often specific to one party.

• Engagement Letter: A document outlining the scope, terms, and fees for a professional service relationship (e.g., hiring a law firm or consultant).

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C. Credit Risk & Underwriting

Understand how lenders and partners assess risk and structure debt.

Credit Risk / Liquidity Risk / Interest Rate Risk

• Credit Risk: The possibility that a borrower or counterparty will fail to meet their debt obligations, resulting in financial loss. Credit risk is central to fintechs offering lending, leasing, or buy-now-pay-later (BNPL) services, and it must be managed through policies, scoring models, and monitoring tools.

• Liquidity Risk: The risk that a company or borrower will be unable to meet short-term obligations due to insufficient cash or easily sellable assets. For fintechs, this often arises when there’s a mismatch between inflows (e.g., repayments) and outflows (e.g., disbursements or operational costs).

• Interest Rate Risk: The risk that changes in interest rates will reduce the profitability or value of an asset or liability. Fintechs holding fixed-rate assets (e.g., loans) are vulnerable if market rates rise, while those funding via debt are exposed when rates increase on liabilities.

Creditworthiness

An assessment of a borrower's ability and willingness to repay a debt. This is determined using financial history, income, liabilities, and behavior patterns — and is often scored using internal or third-party models.

Credit Monitoring

The continuous tracking of a borrower’s financial health and repayment behavior after credit is extended. Fintechs may use dashboards, alerts, or portfolio-level risk flags to identify emerging issues before default occurs.

Obligor / Guarantor / Collateral

These three elements form the foundation of credit risk protection in most lending structures. Together, they define who is responsible, who backs the obligation, and what secures the repayment.

• Obligor: The primary borrower legally responsible for repaying the loan or fulfilling the financial obligation. This can be an individual, business, or organization. The obligor’s financial health and track record are central to credit evaluation.

• Guarantor: A third party who agrees to repay the loan if the obligor fails to do so. Guarantors provide a second layer of security, especially when the obligor lacks a strong credit history or is considered higher risk. They are typically evaluated independently and must have the capacity to repay.

• Collateral: Assets pledged by the obligor (or a third party) to secure the loan. If neither the obligor nor the guarantor repays the debt, the lender can seize or liquidate the collateral to recover losses. Collateral can include real estate, vehicles, equipment, inventory, receivables, or cash deposits.

Together, these elements help lenders and fintech platforms reduce the risk of financial loss by creating multiple paths for repayment and recovery. Strong collateral or a credible guarantor can also improve loan terms or approval odds for higher-risk obligors.

Obligor Risk Rating / Facility Risk Rating

These two ratings are fundamental components of credit risk assessment, especially for fintechs offering lending, leasing, or embedded credit products.

• Obligor Risk Rating assesses the borrower’s overall creditworthiness. It answers the question: How likely is this person or business to default, regardless of the loan structure? This rating considers financial health, credit history, business performance, industry exposure, and behavioral patterns.

• Facility Risk Rating evaluates the risk associated with a specific credit facility or loan structure. It answers the question: Given how this loan is structured, how much risk does it present to the lender? Inputs include collateral coverage, term length, repayment terms, covenants, and the seniority of the loan.

For example, a borrower may have a moderate obligor risk rating but a low facility risk rating if the loan is well-collateralized and includes strong repayment protections. Conversely, a highly creditworthy obligor may be assigned a high facility risk rating if the loan is unsecured, long-term, or lacks covenants.

Using both ratings helps fintechs structure safer products, price loans accurately, and manage portfolio-level exposure over time.

Default / Delinquency / Write-Offs

These terms represent stages in a borrower’s failure to meet repayment obligations. Understanding the differences is critical for fintechs managing credit portfolios, designing collection strategies, or reporting financial performance.

• Delinquency: The earliest stage of non-payment. A loan is considered delinquent when a scheduled payment is missed but the borrower is still within a grace period or hasn’t triggered contractual default terms. Delinquency is typically tracked in aging buckets (e.g., 30, 60, 90+ days past due) and serves as an early warning sign of repayment issues.

• Default: A more serious breach where the borrower fails to meet agreed terms, such as continued non-payment, violating financial covenants, or insolvency. Default allows the lender to take legal or contractual action — such as accelerating repayment, drawing on guarantees, or seizing collateral.

• Write-Offs: The final accounting step when a lender determines that a loan is unlikely to be collected and removes it from the books as an asset. Writing off a loan does not cancel the borrower’s obligation, but it recognizes the loss for financial reporting purposes. It often occurs after exhaustive collection efforts or legal action.

For fintech lenders, these stages must be monitored carefully to manage portfolio risk, comply with accounting standards, and optimize recovery strategies.

Credit Vintages

A method of grouping loans by their origination period to track performance over time. It helps identify whether credit quality is improving or deteriorating across different timeframes.

PaR (Portfolio at Risk)

The percentage of a credit portfolio that is overdue beyond a certain threshold (e.g., 30 days). It's a standard risk metric for microlenders and fintechs operating in credit-heavy models.

Stress Testing / Interest Rate Risk Modeling / Hedging

These are core financial risk management tools used to evaluate a fintech’s exposure under adverse conditions and to proactively protect against losses.

• Stress Testing: A simulation technique used to assess how a portfolio, business model, or financial product would perform under extreme but plausible scenarios. This includes economic shocks such as a spike in interest rates, a drop in borrower repayment rates, or currency devaluation. Stress testing helps fintechs and lenders gauge the limits of their risk tolerance and build contingency plans.

• Interest Rate Risk Modeling: The process of analyzing how changes in interest rates could affect a fintech’s profitability, cost of capital, or asset values. This is especially important for platforms with fixed-rate loan products, floating-rate debt, or deposit-like features. Modeling includes scenario-based forecasts, duration analysis, and net interest margin sensitivity.

• Hedging: A risk mitigation strategy used to reduce or offset potential financial losses. In a fintech context, this might include interest rate swaps to lock in borrowing costs, foreign exchange contracts to manage currency risk, or setting pricing buffers in loan products. While hedging doesn’t eliminate risk, it helps reduce volatility and improve predictability.

Together, these tools enable fintechs to operate more safely in uncertain environments, maintain investor confidence, and comply with regulatory expectations related to financial stability.

Due Diligence / Risk Mitigation

These two processes are essential to building trust, avoiding costly mistakes, and protecting both financial and reputational capital in fintech.

• Due Diligence: A structured investigation or review conducted before entering into a transaction, partnership, or investment. It involves assessing financials, legal standing, compliance posture, product performance, technical infrastructure, and team credentials.

  
  

  In fintech, due diligence is critical when onboarding institutional investors, acquiring another company, launching a new product, or selecting a banking-as-a-service provider. The goal is to uncover risks, validate assumptions, and ensure informed decision-making.

• Risk Mitigation: The proactive steps taken to reduce the likelihood or impact of identified risks. This can include product design features (e.g., transaction limits), operational safeguards (e.g., fraud detection), financial strategies (e.g., hedging or credit insurance), and legal protections (e.g., indemnity clauses or reserve requirements).

  
  

  Effective mitigation strategies are often the outcome of a strong due diligence process and are embedded into company policies, tech infrastructure, and partner contracts.

Together, due diligence and risk mitigation allow fintech founders to scale responsibly, protect customer trust, and maintain investor confidence — especially in regulated or high-growth environments.

Credit Policy / Procedures / Escalation Procedures

These three elements form the backbone of a sound credit governance framework. Together, they define what your credit strategy is, how it’s executed, and what happens when something goes wrong.

• Credit Policy: The high-level document that outlines your organization’s risk appetite, credit objectives, target markets, and underwriting standards. It defines what kinds of customers you serve, what credit terms you offer, acceptable collateral types, and how you balance risk and growth. For fintech lenders, this policy also helps align credit strategy with compliance requirements and investor expectations.

• Credit Procedures: The detailed, step-by-step operational workflows that implement the credit policy. Procedures include how applications are evaluated, what documents are required, how scoring models are applied, how approvals are granted, and how exceptions are handled. These are often internal-facing and ensure consistency, accountability, and efficiency in credit operations.

• Escalation Procedures: A predefined path for handling issues that fall outside standard credit processes — such as large exceptions, technical failures, fraud alerts, or loan restructuring. These procedures specify when and how a case is escalated (e.g., from a junior analyst to the credit committee), what documentation is needed, and who has authority to override standard decisions.

Together, these tools ensure that a fintech’s credit operations are not only efficient but also auditable, scalable, and prepared for risk events.

De-Risking Mechanisms

Tactics used to reduce potential losses in a transaction, such as collateral, guarantees, or first-loss structures.

Key Credit Risks

Principal risks associated with a borrower, such as repayment capacity, industry volatility, or regulatory exposure.

Primary / Secondary / Tertiary Sources of Repayment

These are the tiers of expected cash flow sources that lenders evaluate when determining a borrower’s creditworthiness and whether a deal should move forward. Repayment sources can involve a mix of likely outcomes, but the example below outlines a typical stratification:

• Primary Source of Repayment: The borrower’s operating cash flow — ideally consistent, predictable revenue from core business activities. This is the strongest and most preferred source because it reflects ongoing business viability.

• Secondary Source of Repayment: Liquidation of pledged assets or collateral (e.g., equipment, accounts receivable, or real estate) if operating cash flows are insufficient. This often informs loan structuring and collateralization.

• Tertiary Source of Repayment: External supports such as personal or corporate guarantees, credit insurance, or contingent liabilities. These kick in only if both primary and secondary sources fail.

In credit approval memos, these repayment tiers must be clearly articulated to assess repayment reliability and downside protection. A weak or vague repayment flow increases deal risk (and likely should result in denial or stricter loan terms).

Base Case / Stress Case Projections 

These are two sets of forward-looking financial forecasts used to evaluate a company’s resilience under different conditions:

• Base Case Projections: Reflect expected performance based on current trends, reasonable growth assumptions, and management’s operating plan. This scenario is typically used to price and structure deals.

• Stress Case Projections: Model more conservative or adverse conditions — such as revenue shortfalls, cost increases, or delayed collections — to test whether the business can still meet debt obligations or covenant thresholds under pressure.

Both are critical in credit approval memos, fundraising conversations, and risk analysis. They help lenders, investors, and founders understand how much volatility the business can absorb while still remaining solvent and operational.

Pro Forma Financials

Financial statements that present a company’s projected performance or adjusted historical results based on specific assumptions or future events.

Commonly used when raising capital, applying for loans, or planning acquisitions, these forecasts help stakeholders understand how a company might perform after a transaction or strategic shift.

Pro forma statements may reflect new revenue streams, cost reductions, debt issuance, or business combinations — and often include a pro forma income statement, balance sheet, and cash flow statement.

In fintech, they’re essential for demonstrating expected impact from funding rounds, new product launches, or scaling operations — and for validating repayment ability under new capital structures.

Debt Restructuring

A process where a borrower renegotiates the terms of existing debt with a lender to improve repayment feasibility. This may involve extending the loan term, reducing the interest rate, changing the repayment schedule, converting debt to equity, or forgiving part of the principal.

In fintech, debt restructuring is often used when a business is under financial stress but still has viable long-term potential. It can help avoid default, maintain operational continuity, and preserve lender relationships — but may also trigger credit rating impacts or investor scrutiny.

Founders should approach restructuring proactively, with detailed financials, base/stress case projections, and a clear explanation of how the revised terms will stabilize the business.

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D. Lending Lifecycle & Deal Review

Every step from application to portfolio management.

Origination / Underwriting / Close

• Origination: The process of receiving and preparing a loan or credit application, including data collection, identity verification, and initial credit review. This is the starting point of any lending relationship.

• Underwriting: The in-depth evaluation of the applicant’s creditworthiness and the proposed terms of the loan. Underwriters analyze risk factors, collateral, financials, and scoring models to recommend whether to proceed.

• Close: The final step in the credit process where legal documents are signed, funds are disbursed, and the deal officially moves onto the lender’s books.

Pre-Qualification Screenings / Deal Staging Tool

• Pre-Qualification Screenings: Quick assessments — often automated — that determine whether an applicant meets basic eligibility criteria before going through full underwriting. These help fintechs save time and reduce pipeline noise.

• Deal Staging Tool: A workflow management system that tracks where each deal is in the pipeline (e.g., lead, diligence, approved, funded). These tools help teams coordinate across sales, legal, credit, and operations.

Credit Approval Memo / Credit Committee

• Credit Approval Memo: A formal document prepared by analysts or underwriters summarizing the deal, key risks, borrower background, financials, and the recommendation to approve or decline. It supports internal decision-making and regulatory documentation.

• Credit Committee: A group of decision-makers (e.g., senior credit officers, legal, compliance) who review and approve higher-risk or high-value credit transactions that exceed standard limits.

Approval / Conditional Approval / Decline

• Approval: Full authorization to proceed with a loan or credit agreement, based on satisfactory review of all terms and documentation.

• Conditional Approval: A provisional “yes,” contingent on certain conditions being met (e.g., updated financials, securing a guarantor, regulatory clearance).

• Decline: A decision not to move forward with the application due to risk concerns, policy misalignment, or missing requirements.

Credit Memo / Executive Summary / Contracts

• Credit Memo: The final write-up summarizing the loan structure, terms, borrower profile, and approval rationale. It lives on as part of the credit file and audit trail.

• Executive Summary: A condensed version of the credit memo, used to brief senior leadership or investors on key aspects of the deal.

• Contracts: The legally binding documents that outline the terms of the credit agreement, including repayment obligations, covenants, and remedies in case of breach.

Opportunity to Cure / Breach Letter / Demand Letter / Notice of Acceleration

• Opportunity to Cure: A clause in the credit agreement giving the borrower a fixed time window to correct a default or noncompliance before penalties are enforced.

• Breach Letter: A formal notice informing the borrower that they’ve violated specific terms of the agreement (e.g., missed payment, failed covenant).

• Demand Letter: A written demand for repayment, typically issued after a breach, signaling that legal or collection action may follow.

• Notice of Acceleration: A lender's declaration that all outstanding loan amounts are immediately due and payable, usually triggered by default.

Relationship Manager / Account Manager

• Relationship Manager: Oversees the borrower relationship post-disbursement, ensuring satisfaction, resolving issues, and identifying upsell opportunities.

• Account Manager: Manages a portfolio of borrowers or partners, often focused on day-to-day operations and customer service.

Credit Associate / Credit Analyst / Credit Officer / Chief Credit Officer

• Credit Analyst: A junior team member who supports credit operations by collecting financial documents, preparing presentation materials, coordinating internal workflows, and assisting with deal execution. Credit analysts often serve as the first point of contact for assembling credit files.

• Credit Associate: A mid-level credit professional who performs detailed financial and risk analysis of prospective borrowers. Responsibilities include modeling projections, assessing repayment capacity, identifying key risks, and drafting credit approval memos for review by decision-makers.

• Credit Officer: A decision-making role responsible for evaluating credit applications and determining whether to approve, conditionally approve, or decline them. Credit officers operate within established credit policies and approval thresholds, and they often mentor analysts and associates.

• Chief Credit Officer (CCO): The most senior credit executive within the organization. The CCO sets overall credit policy, manages portfolio risk across all business lines, oversees the credit team, and ensures compliance with both internal governance and external regulatory requirements.

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E. Capital Stack & Debt Instruments

The structures you’ll use to fund and grow your fintech.

Term Loan / Delayed Draw Term Loan / Draw to Term

• Term Loan: A lump-sum loan repaid over a fixed schedule, often used to fund expansion, operations, or asset purchases. Terms are defined in advance (e.g., 36 months at 8% fixed interest).

• Delayed Draw Term Loan (DDTL): A loan facility that allows the borrower to access funds in pre-approved increments over time, rather than all at once. Ideal for staged growth or multi-phase capital deployment.

• Draw to Term: A structure where a line of credit automatically converts to a term loan once fully drawn, locking in repayment terms from that point forward.

Revolving Line of Credit

A flexible credit facility that allows a borrower to draw, repay, and re-draw funds up to a set limit. Often used for working capital needs and cash flow variability.

Senior Secured Debt / Subordinate Debt / Mezzanine Debt

• Senior Secured Debt: Debt that has first claim on the borrower’s assets in case of default and is typically secured by collateral. Lenders here take the least risk and often receive lower interest rates.

• Subordinate Debt: Also known as junior debt, this ranks below senior debt in repayment priority. It carries more risk and typically higher interest rates to compensate.

• Mezzanine Debt: A hybrid of debt and equity, often unsecured, and typically used in growth-stage financing. It may include warrants or rights to convert into equity and sits between senior debt and equity in the capital stack.

Asset-Based Lending / Borrowing Base Lending

• Asset-Based Lending (ABL): Loans secured by the company’s tangible assets, such as inventory, machinery, or real estate. The loan amount is tied to the appraised value of those assets.

• Borrowing Base Lending: A form of ABL where the credit limit is based on a percentage of eligible assets (e.g., 85% of accounts receivable, 50% of inventory). The borrowing base is recalculated regularly.

Accounts Receivables Finance / Trade Payables Finance

• Accounts Receivables Finance: Financing where a business borrows against or sells its outstanding invoices. Often used to improve cash flow without waiting for customers to pay.

• Trade Payables Finance: A solution allowing suppliers to be paid early while buyers extend their own payment terms. It supports supply chain liquidity, typically via third-party financiers.

Cash Flow Lending / Project Finance / Lease Financing

• Cash Flow Lending: Loans based on projected future cash flow rather than physical collateral. Risk is assessed by the borrower’s operating performance and repayment capacity.

• Project Finance: Structured financing based on the cash flows and risks of a specific project, not the general credit of the borrower. Common in infrastructure, energy, and public-private partnerships.

• Lease Financing: A structure in which a lender purchases an asset (e.g., equipment, vehicles) and leases it to a borrower. This provides use of the asset without full upfront cost or ownership.

First-Loss Reserve / First-Loss Guarantee / Ring-Fencing / SPV

• First-Loss Reserve: Capital set aside to absorb the first layer of losses in a credit program. Used to de-risk portfolios and attract co-investors.

• First-Loss Guarantee: A third party agrees to cover initial losses in a lending pool, protecting senior capital providers and enabling blended finance models.

• Ring-Fencing: Structuring a set of assets, liabilities, or operations in a way that isolates them from the rest of the company — useful for managing risk and regulatory exposure.

• Special Purpose Vehicle (SPV): A separate legal entity created to isolate financial risk or facilitate securitization. SPVs are often used to house loan portfolios or structure investor deals.

Standby Letter of Credit / Letter of Credit

• Standby Letter of Credit (SBLC): A financial guarantee issued by a bank promising payment to a third party if the client fails to fulfill a contractual obligation.

• Letter of Credit (LC): A document issued by a bank guaranteeing that a seller will receive payment as long as delivery conditions are met. Common in trade finance.

Purchase Card

A corporate charge card used for approved business expenses, including inventory, subscriptions, or vendor payments. Purchase cards streamline procurement and simplify tracking, and they may be integrated into expense management systems for better controls.

Daylight Overdrafts

A temporary negative balance in a bank account that occurs during the business day when outgoing payments exceed available funds, but are expected to be covered by incoming credits before the end of the day.

Common in high-volume payment environments (like fintechs, banks, or payment processors), daylight overdrafts allow institutions to maintain liquidity without triggering formal overdraft penalties — as long as the shortfall is cleared by close of business.

However, regulators and central banks (like the U.S. Federal Reserve) monitor these exposures closely, and institutions may need pre-approval or collateral to access this intraday credit.

Overdraft Line

A pre-approved credit facility that allows an account holder to overdraw their bank account up to a certain limit. Unlike a daylight overdraft, which must be cleared by end-of-day, an overdraft line can carry a balance beyond the business day and typically incurs interest and fees.

This line of credit acts as a buffer for short-term liquidity gaps — especially useful for startups and fintechs managing fluctuating cash flows. It’s often linked to checking accounts and is activated automatically when available funds run short.

While flexible, frequent use of an overdraft line may signal cash management issues to lenders and investors, so it should be used strategically.

Commercial Paper / Commercial Paper Backstop

• Commercial Paper: Short-term, unsecured debt issued by corporations (usually investment-grade) to finance payroll, inventory, or short-term liabilities. Not typical for early-stage startups but relevant in advanced treasury operations.

  
  

• Commercial Paper Backstop Facility: Ensures the company has committed capital available to repay maturing commercial paper if new paper cannot be issued — maintaining solvency and market confidence.

Bridge Loan

A short-term loan used to cover immediate financing needs while waiting for long-term funding (e.g., venture capital, revenue inflow, or IPO proceeds). Typically carries higher interest.

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F. Fundraising & Deal Terms

Terms you’ll see in venture deals, loan agreements, and investor conversations.

Deal Structuring

The process of designing the financial, legal, and operational terms of a business agreement — such as an investment, loan, or acquisition — to meet the goals of all parties while balancing risk and return.

In fintech, deal structuring includes defining:

• Capital Type: Debt, equity, hybrid, or convertible instruments

• Control Terms: Board rights, veto powers, covenants

• Economic Terms: Valuation, interest rates, repayment mechanics, liquidation preferences

• Risk Mitigation: Guarantees, collateral, default triggers, exit provisions

Good structuring ensures alignment between founder, investor, and lender interests — maximizing long-term viability and minimizing legal or financial surprises later.

Term Sheet

A non-binding document that outlines the key financial and legal terms of a potential investment or financing deal. It acts as a roadmap for negotiations and serves as the foundation for final, legally binding agreements. Term sheets help ensure early alignment between parties on valuation, structure, rights, and responsibilities.

Origination Fees / Arrangement Fees / Interest Rate / Incentives

• Origination Fees: Upfront charges assessed by a lender for processing a loan. These are typically a percentage of the loan amount and affect the borrower’s effective cost of capital.

• Arrangement Fees: Fees paid to a lender or arranger for structuring a financing transaction, common in syndicated or structured deals.

• Interest Rate: The cost of borrowing money, expressed as a percentage of the principal. Rates may be fixed or variable and impact overall repayment obligations.

• Origination Incentives: Discounts, rebates, or bonuses used to encourage borrowers to take out a loan or investors to commit capital. These can also include equity sweeteners or milestone-based rewards.

Unfunded Commitment Fees / Unused Line Fees

• Unfunded Commitment Fees: Charges imposed on the undrawn portion of a committed credit facility. These compensate lenders for holding capital in reserve.

• Unused Line Fees: Fees charged for not fully utilizing a revolving credit facility. Designed to ensure borrowers don’t over-request credit they don’t intend to use.

Credit Agreement / Redline Credit Agreement

• Credit Agreement: A legally binding contract that sets the terms and conditions of a loan or credit facility between a borrower and a lender. It outlines the repayment schedule, interest rate, collateral, covenants, default triggers, and legal remedies. The credit agreement governs how the debt relationship will operate from disbursement through final repayment and is enforceable in court.

• Redline Credit Agreement: A draft version of the credit agreement that shows all proposed edits, deletions, and comments made during negotiations between the borrower and lender. The redline format enables both parties to track changes in real-time and facilitates legal review and alignment before finalizing the agreement. It reflects the evolving nature of complex credit deals prior to execution.

Master Credit Agreement (MCA)

A comprehensive, overarching credit contract that governs the general terms and conditions applicable to multiple credit facilities between the same borrower and lender (or lending group). The MCA establishes standardized provisions — such as default terms, covenants, and representations — that apply across all individual credit agreements issued under it.

This structure streamlines documentation, simplifies administration, and reduces legal friction when adding or amending specific loans, tranches, or credit instruments over time.

Guarantors / Collateral / Interest Buy-Downs / Right of First Refusal

• Guarantors: Third parties who agree to repay a loan if the borrower defaults. They reduce lender risk and are typically subject to independent credit review.

• Collateral: Assets pledged by a borrower to secure a loan. If the borrower defaults, the lender can seize the collateral to recover losses.

• Interest Buy-Downs: Payments made (by a borrower or third party) to reduce the interest rate on a loan, either temporarily or over the life of the loan.

• Right of First Refusal (ROFR): A contractual right that gives an existing investor or partner the option to match any third-party offer before the company can accept it. Common in equity fundraising and strategic partnerships.

Change of Control Clause

A provision that triggers certain rights or actions (like immediate repayment or conversion of equity) if the company undergoes a significant ownership change — such as an acquisition or merger.

Cross Default / Cross Acceleration

• Cross Default: A clause that triggers default on one loan if the borrower defaults on another agreement. It protects lenders from being blindsided by external liabilities.

• Cross Acceleration: Similar to cross default, but triggered if another lender accelerates repayment terms (due to default or breach), prompting a parallel acceleration in the current agreement.

Performance-to-Plan Covenants

Financial benchmarks written into investor or lender agreements that require the company to meet projected revenue, margin, or user growth targets. Falling short may trigger renegotiation or penalties.

Return on Assets / Return on Equity

• Return on Assets (ROA): A performance metric that measures how efficiently a company uses its assets to generate profit. Calculated as net income divided by total assets.

• Return on Equity (ROE): A measure of financial return to shareholders. Calculated as net income divided by shareholder equity. Often monitored by investors to assess business efficiency.

Relationship Economics / Strategic Rationale

• Relationship Economics: The measurable financial value of a business relationship. In fintech fundraising, this might refer to investor access, ecosystem value, or customer acquisition benefits beyond just capital.

• Strategic Rationale: The logic or reasoning behind a business decision — particularly in deals, investments, or partnerships. A strong strategic rationale explains how the deal aligns with growth, risk, or long-term positioning.

Cash Flow Sweeps

A loan provision that requires a borrower to use excess cash (above a defined threshold) to repay outstanding debt before using it for dividends, reinvestment, or other discretionary spending.

Sweeps are commonly included in credit agreements to protect lenders by accelerating repayment when the business generates strong cash flow. They may be triggered monthly, quarterly, or annually, and are often based on Free Cash Flow or Excess Cash Flow calculations.

For fintech founders, cash flow sweeps can reduce flexibility — so it’s important to negotiate thresholds and carveouts that preserve working capital and growth plans.

Credit Agreement Punch List

A checklist of all outstanding items, documents, and actions that must be completed before a loan can close and funds can be disbursed. This list is typically maintained by legal counsel or the deal team and ensures full compliance with the terms of the credit agreement.

Items may include:

• Signed loan documents

• Evidence of insurance coverage

• Collateral filings (e.g., UCC filings)

• Board resolutions

• KYC/AML documentation

• Fee payments

• Covenant certifications

For founders, this punch list is critical — it’s the final mile before funding. Delays or errors here can stall your capital raise or impact credibility with lenders and investors.

Initial Public Offering (IPO)

The first time a privately held company offers its shares to the public through a regulated stock exchange, allowing outside investors to buy equity in the business.

An IPO helps companies raise significant capital to fund growth, repay debt, or provide liquidity to early investors and employees. It also comes with increased regulatory scrutiny, public disclosure requirements, and pressure for quarterly performance.

Going public is a major milestone — but also a strategic shift that requires robust financials, strong governance, and readiness for public market expectations.

Acquisition / Merger

Two common strategies for business combination — each with different implications for control, integration, and valuation.

• Acquisition: When one company purchases another, taking control of its assets, operations, or equity. Acquisitions can be friendly or hostile and are often used to expand market reach, acquire technology, or eliminate competition.

• Merger: When two companies combine to form a new entity, usually as equals. Mergers require alignment on valuation, governance, and culture and are often positioned as mutually beneficial growth strategies.

In fintech, acquisitions are common among larger players looking to buy innovative startups. Founders should prepare for due diligence, valuation negotiations, and post-transaction integration risks.

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G. Performance Metrics & Financial Ratios

Use these to prove your model, maintain lender confidence, and fundraise smarter.

EBITDA / Adjusted EBITDA

• EBITDA (Earnings Before Interest, Taxes, Depreciation, and Amortization): A measure of a company’s core operating profitability. It strips out financing and accounting variables to give investors and lenders a clean view of operational earnings.

• Adjusted EBITDA: EBITDA modified to exclude non-recurring, irregular, or one-time items (e.g., legal settlements, restructuring costs). Adjusted EBITDA is often used in fundraising or M&A to present a normalized view of profitability.

Debt-to-EBITDA / Debt-to-Equity / Debt-to-Capitalization

• Debt-to-EBITDA: A leverage ratio that compares total debt to EBITDA. It gauges how many years of earnings would be needed to repay outstanding debt. Lower is generally better.

• Debt-to-Equity: Shows how much debt a company has for every dollar of equity. A higher ratio suggests greater financial risk but may be acceptable in capital-intensive businesses.

• Debt-to-Capitalization: Calculates debt as a percentage of total capital (debt + equity). It’s a broader view of leverage and financial structure.

Senior Leverage Ratio / Total Leverage Ratio

• Senior Leverage Ratio: Measures the amount of senior (priority) debt relative to EBITDA. It's used to determine repayment capacity for lenders with first claims on assets.

• Total Leverage Ratio: Measures all debt (senior + subordinate) relative to EBITDA. It provides a comprehensive view of leverage exposure.

Interest Coverage Ratio / Fixed Charge Coverage Ratio

• Interest Coverage Ratio: EBITDA divided by interest expense. It reflects a company’s ability to cover interest payments from earnings.

• Fixed Charge Coverage Ratio: Measures the ability to cover all fixed obligations (e.g., interest, lease payments, debt repayments). It’s a more conservative metric for evaluating solvency.

Free Cash Flow After Discretionary Items

The amount of cash a business has left after covering operating expenses, taxes, capital expenditures and any voluntary (non-mandatory) outflows — such as bonuses, dividends, early debt repayments, or R&D spend.

It’s a refined version of Free Cash Flow (FCF) that accounts for leadership decisions around spending flexibility. Investors and lenders use this metric to assess how much truly available cash the business retains for reinvestment, debt service, or unexpected needs.

For fintech startups, strong Free Cash Flow After Discretionary Items signals disciplined cash management and provides a clearer picture of repayment capacity or capital readiness.

KPIs / Unit Economics

• Key Performance Indicators (KPIs): Quantifiable metrics that track business health and operational efficiency. Common fintech KPIs include customer acquisition cost (CAC), loan default rate, active users, and average revenue per user (ARPU).

• Unit Economics: The revenue and cost associated with serving a single customer or unit. Founders use this to understand scalability and profitability at the individual level (e.g., net profit per loan or per wallet user).

Sensitivity Matrix / Scenario Planning

• Sensitivity Matrix: A tool that models how changes in key assumptions (e.g., churn rate, interest margin, default rate) impact outcomes. It helps founders identify which variables have the greatest influence on performance.

• Scenario Planning: Strategic modeling that explores how different future conditions — optimistic, base case, and downside — would affect the business. Often paired with board reporting, fundraising decks, and financial planning.

Tier 1 Capital

The core capital of a bank, made up primarily of common equity and disclosed reserves. It serves as the primary cushion against losses and is a key measure of a financial institution’s strength and solvency.

Regulators (like the Federal Reserve or Basel Committee) require banks to maintain minimum Tier 1 Capital ratios to ensure they can absorb shocks without collapsing. This ratio is critical in determining how much risk a bank can take on — including how much it can lend or invest.

For fintech founders partnering with banks or building regulated entities, understanding Tier 1 Capital helps you evaluate a partner’s financial stability and their ability to back your products at scale.

Dry Powder

Capital that has been committed but not yet deployed. The term is commonly used in venture capital, private equity, and institutional credit to describe funds that are reserved for future investment rounds, follow-on opportunities, or strategic expansion.

In a fintech context, dry powder can also refer to internal reserves set aside for growth initiatives, risk absorption, or emergency liquidity needs. Maintaining dry powder allows a company to stay flexible and respond quickly to market shifts, new partnerships, or unexpected capital demands.

Value Proposition

The unique benefit a product or service delivers to customers. It answers the question: Why will customers choose your solution over others — and pay for it?

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H. Financial Statements & Analysis

Accounting concepts every fintech founder must understand.

Financial Analysis

The process of evaluating a company’s financial performance using metrics, ratios, and historical data. It informs decision-making for budgeting, lending, and fundraising.

Income Statement / Balance Sheet / Cash Flow Statement

• Income Statement: Also called the profit and loss statement (P&L), this shows revenue, expenses, and net income over a defined period. It answers: Is the business making money from its operations?

• Balance Sheet: A snapshot of the company’s financial position at a specific moment in time. It details assets, liabilities, and equity, showing what the business owns and owes.

• Cash Flow Statement: Tracks the movement of cash in and out of the business. It’s broken into operating, investing, and financing activities and helps founders understand liquidity, not just profitability.

Statement of Retained Earnings

Shows changes in retained earnings across reporting periods — i.e., how much profit the company has reinvested or distributed as dividends.

Amortization Schedules / Repayment Schedules

• Amortization Schedule: A table showing how a loan will be repaid over time, breaking each payment into interest and principal. Useful for projecting cash flow and interest expense.

• Repayment Schedule: A broader term that includes amortizing loans, bullet repayments, balloon structures, and other custom payment timelines negotiated in loan agreements.

Operating Income

Also known as EBIT (Earnings Before Interest and Taxes), this is the profit generated from core business activities, excluding non-operating income and expenses.

Bookings / Backlog

These two metrics work together to show the health of your revenue pipeline and delivery performance.

• Bookings refer to the total value of customer contracts or agreements signed within a given period, regardless of when revenue will be recognized. This includes loan approvals, enterprise contracts, service subscriptions, or platform integrations. Bookings reflect sales momentum and market demand.

• Backlog is the portion of those bookings that has not yet been delivered or recognized as revenue. It represents future obligations — such as undisbursed loans, unlaunched features, or pending deployments — and is a key indicator of revenue visibility and operational load.

Managing backlog alongside bookings helps founders plan staffing, fulfillment, and cash flow.

Book-to-Bill Ratio / Backlog Age

• Book-to-Bill Ratio: A metric that compares new orders (bookings) to fulfilled orders (billings) in a given period. A ratio above 1.0 indicates growing demand; below 1.0 may signal shrinking pipelines. Investors often use the book-to-bill ratio (bookings ÷ billings) to assess whether the business is growing sustainably or falling behind in execution.

• Backlog Age: The average time outstanding orders remain unfulfilled. Long backlog age can suggest delivery delays or operational inefficiencies, even if bookings are strong.

Cap Table

A breakdown of company ownership, showing who holds equity, how much they own, and how different funding rounds have affected ownership. Critical for understanding dilution and negotiating future investment.

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I. Fundraising Pathways

Explore diverse funding models to consider.

Crowdfunding

A method of raising capital from a large number of individual contributors, typically via an online platform. Crowdfunding may be donation-based (no equity or repayment), reward-based (early access to a product), or investment-based (equity or debt). Platforms like Kiva, Wefunder, or Republic allow fintech founders to tap into community-driven financing.

Venture Capital

Equity investment from institutional funds in high-growth startups with scalable business models. VC firms exchange capital for ownership and usually seek a significant return via acquisition or IPO. Venture capital often comes with board oversight, milestone expectations, and structured fundraising rounds.

Angel Investment

Capital provided by high-net-worth individuals (angels) in exchange for early equity ownership. Angels often invest at the pre-seed or seed stage and may offer mentorship, networks, or strategic advice alongside funding. Deals tend to be more flexible than institutional VC.

Private Equity

Growth or buyout capital provided to later-stage, revenue-generating companies. Private Equity (PE) firms typically seek controlling ownership, restructure operations for profitability, and plan for eventual exit through sale or public offering. Less common for early-stage fintechs, but relevant for scaling or consolidating platforms.

Grants

Non-dilutive capital awarded by governments, foundations, or nonprofits to support businesses that align with specific missions (e.g., financial inclusion, climate resilience, or racial equity). Grants do not require repayment or equity and are ideal for impact-driven fintechs. However, they often involve competitive applications and strict reporting requirements.

Peer-to-Peer Lending (P2P)

An online lending model where individuals lend to other individuals or small businesses without traditional intermediaries. Fintech startups can sometimes raise capital through P2P platforms or create them as credit solutions for their customers. Risk is shared across many lenders.

Bootstrapping

Growing a business using personal savings, revenue reinvestment, or low-cost resources — without raising external capital. Bootstrapping gives founders full control and ownership but often limits the pace of growth and requires careful cash flow management.

Catalytic Funding

Mission-aligned capital designed to de-risk innovation and attract follow-on investment. Catalytic funding includes first-loss guarantees, recoverable grants, concessionary loans, and other blended finance tools. It’s often used to seed underserved markets or technologies with high social impact but uncertain commercial outcomes.

Commercial Debt

A loan or credit facility extended by a bank, credit union, or non-bank lender to a business. Unlike venture capital or angel investment, commercial debt does not require giving up equity and is typically structured with fixed repayment terms, interest rates, and covenants.

Commercial debt can take many forms, including term loans, lines of credit, equipment financing, or revenue-based loans. It is most accessible to companies with:

• Steady cash flow

• Strong financial reporting

• Assets to pledge as collateral

For fintechs, commercial debt is especially useful for financing loan portfolios, investing in infrastructure, or bridging cash flow gaps without dilution. However, borrowers must be prepared for underwriting requirements, personal guarantees (in early stages), and fixed repayment obligations regardless of performance.

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J. Risk Concentration & Monitoring

Avoid pitfalls that can quietly unravel your business.

Credit Exposure

The total value at risk if a borrower or counterparty fails to meet its obligations. For fintech lenders, it includes disbursed loans, outstanding credit lines, and any guaranteed transactions. Exposure must be actively monitored across borrower segments, geographies, and products.

Balance Sheet vs Off-Balance Sheet (OBS) Credit Exposure

• Balance Sheet Credit Exposure: Loans or liabilities that appear directly on your financial statements. These affect your leverage and regulatory capital ratios.

• Off-Balance Sheet Credit Exposure: Credit commitments, guarantees, or third-party managed portfolios that don’t show up as assets or liabilities but still pose potential risk. Common in BaaS or embedded lending models.

Customer Concentration Risk

Occurs when a large portion of your revenue or receivables is tied to a small number of customers. Losing just one can materially impact cash flow or investor confidence. Investors and lenders often flag this as a red flag during diligence.

Contract Concentration Risk

Similar to customer concentration, but applies to individual deals or contract types. If one type of agreement (e.g., government contracts, reseller channels) dominates your revenue, changes in that segment could disproportionately affect your business.

Settlement Risk

The risk that one party in a financial transaction fails to deliver funds or assets as expected — even after the other party has fulfilled their side. This risk is highest when payments are not exchanged simultaneously (e.g., in cross-border or multi-step transactions).

For fintechs, settlement risk can emerge when integrating third-party payment processors, clearinghouses, or crypto rails. Strong operational controls, real-time reconciliation, and reputable infrastructure partners are key to reducing this risk.

Payment Risk

The risk that a payment is delayed, fails, or is disputed — affecting cash flow, customer trust, or compliance obligations. Payment risk can stem from user errors, system outages, fraud, or issues with APIs and banking partners.

Fintechs must design with payment reliability in mind. That includes implementing retries, fraud checks, fallback protocols, and clear communication to both senders and receivers.

Right-Way Risk / Wrong-Way Risk

• Right-Way Risk: When your exposure moves favorably in adverse conditions. For example, a borrower becomes more creditworthy as rates rise.

• Wrong-Way Risk: When exposure increases in tandem with counterparty risk. For instance, if a borrower and their collateral are both affected by the same market downturn.

Short-Term vs Long-Term Debt

• Short-Term Debt: Obligations due within 12 months. Often used for working capital but can strain liquidity if not matched to cash flow.

• Long-Term Debt: Obligations due beyond 12 months. Provides stability but can increase total leverage and interest costs.

Mandatory Debt Amortization

Required periodic principal repayments on a loan. Amortization schedules ensure that the loan is gradually paid down over time rather than repaid in a lump sum. Missing an amortization payment can trigger default.

Portfolio / Portfolio Review

• Portfolio: The collection of loans, credit products, or investments managed by your company. In fintech, this includes active borrower accounts, embedded finance programs, or managed assets.

• Portfolio Review: A recurring analysis of performance, risk, and compliance across the portfolio. This ensures early detection of issues like rising delinquencies or market concentration.

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Final Thoughts

Understanding these terms isn’t just about sounding informed — it’s about making sharper decisions, building lender-ready systems, and protecting your business from quiet financial risks. Whether you’re structuring your first credit product or navigating complex fundraising options, this glossary is here to help you lead with clarity.

If you’re ready for deeper guidance, visit blazegroup.io/consulting to explore our Equitable Finance program — built to help fintech founders design sustainable, scalable financial strategies from the inside out.