In today’s fast-moving small business environment, knowing your numbers isn’t enough — you also need to understand the language behind them. From applying for funding to managing day-to-day operations, Canadian entrepreneurs are constantly encountering financial and legal terminology that can impact their decisions. Misunderstanding even a single term could lead to missed opportunities, delays in funding, or costly errors.
This glossary was created to give small business owners across Canada a practical tool to navigate essential terms with clarity and confidence. Whether you’re speaking to a lender, reviewing your cash flow, or exploring new financing options, having the right words at your fingertips helps you stay informed, protect your business, and grow on your own terms. Consider this your go-to reference for understanding the terms that shape your business future.
Accounts Payable (AP)
Money a business owes to suppliers or vendors for goods and services received but not yet paid for. These are considered short-term liabilities on the balance sheet.
Accounts Receivable (AR)
Funds owed to a business by its customers for products or services delivered on credit. Accounts receivable are recorded as current assets.
Accrual Accounting
An accounting method where revenues and expenses are recorded when they are earned or incurred, not when cash is exchanged. This provides a more accurate financial picture than cash accounting.
Alternative Business Funding
Any form of financing outside of traditional bank loans. This includes merchant cash advances, invoice factoring, asset-based lending, and online lenders, often used by small businesses needing faster or more flexible funding.
Amortization
The gradual reduction of a loan or intangible asset over time through scheduled payments. In accounting, it often refers to spreading the cost of an asset over its useful life.
Angel Investor
An individual who provides capital to early-stage businesses, typically in exchange for equity ownership. Angel investors often bring industry expertise and mentorship in addition to funding.
Asset-Based Lending (ABL)
A type of financing where a business secures a loan using assets such as inventory, accounts receivable, or equipment. ABL is commonly used for working capital needs.
Assets
Anything of value owned by a business, including cash, equipment, property, inventory, and accounts receivable. Assets are categorized as current or non-current on the balance sheet.
Balance Sheet
A financial statement that outlines a company’s assets, liabilities, and equity at a specific point in time. It shows what a business owns and owes, and the owner’s stake in the company.
Bank Operating Loan
A line of credit provided by a bank to cover a business’s day-to-day operational expenses. Interest is charged only on the amount used.
Bank Term Loan
A lump sum loan from a bank with a fixed repayment schedule and interest rate. It is often used for major purchases, equipment, or expansion.
Bookkeeper
A professional responsible for recording daily financial transactions, maintaining ledgers, and preparing basic financial reports. Bookkeepers support accurate accounting.
Break-Even Point
The point at which total revenue equals total expenses, meaning the business is not making a profit or loss. Understanding this helps determine pricing and cost management.
Business Broker
A business broker is An intermediary who assists in the buying and selling of businesses. Business brokers evaluate value, facilitate negotiations, and ensure proper documentation.
Business Credit Score
A business credit score is a numerical rating that reflects a business’s creditworthiness, based on factors like payment history, outstanding debts, and credit utilization. It affects access to financing.
Business Debt Coverage
A ratio that measures a company’s ability to repay its debts using available cash flow. Lenders use this to assess financial stability.
Business Lender
An institution or individual that provides loans or financing to businesses. This includes traditional banks as well as alternative lenders like Greenbox Capital.
Business Number (BN)
A 9-digit number assigned by the Canada Revenue Agency (CRA) to identify businesses for tax and regulatory purposes. It’s used for GST/HST, payroll, and import/export accounts.
Business Plan
A formal document outlining a business’s objectives, strategies, market research, and financial projections. It is essential when applying for funding or planning growth. Read more about Financial Business Planning.
Canada Emergency Business Account (CEBA)
A federal loan program launched during COVID-19, offering interest-free loans to small businesses and not-for-profits. Partial loan forgiveness was available if repaid by specific deadlines. Read more about Refinancing CEBA Loans.
Canada Small Business Financing Program (CSBFP)
A federal initiative that helps small businesses obtain loans by sharing the risk with lenders. It supports purchasing equipment, real estate, or improving cash flow. Read more about Canada Small Business Financing Program Loans.
Cash Accounting
An accounting method where income and expenses are recorded only when cash is received or paid. It’s simpler than accrual accounting but may not reflect long-term financial health.
Cash Flow
The net movement of cash in and out of a business. Positive cash flow indicates the business can cover its obligations and invest in growth. Read more about Cash Flow.
Certificate of Incorporation
An official document issued by a provincial or federal government that legally recognizes the formation of a corporation in Canada.
Collateral
Assets pledged by a borrower to secure a loan. If the borrower defaults, the lender can seize the collateral to recover the loan amount.
Corporation
A legal entity separate from its owners, offering limited liability. Corporations can own property, enter contracts, and are taxed separately from shareholders.
Cost of Goods Sold (COGS)
The direct costs associated with producing or delivering a product or service. It includes materials, labour, and manufacturing expenses.
The federal government agency responsible for administering tax laws in Canada, including income taxes, GST/HST, payroll deductions, and benefits programs. For small businesses, the CRA handles everything from business number registration and tax filings to audits and compliance. Staying in good standing with the CRA is essential for maintaining financial health and avoiding penalties.
Credit Score
A numerical rating that reflects an individual’s or business’s credit history and repayment ability. In Canada, scores typically range from 300 to 900. Read more about credit score.
Creditworthiness
An assessment of a borrower’s ability to repay debt, based on credit history, income, assets, and financial obligations. It influences loan approval and interest rates.
Current Assets
Assets that are expected to be converted to cash or used within one business cycle (usually one year), such as cash, inventory, and accounts receivable.
Current Liabilities
Obligations that a business needs to pay within one year, including accounts payable, short-term loans, and accrued expenses.
Debt Consolidation
The process of combining multiple debts into a single loan, often with better repayment terms. This can simplify budgeting and reduce interest costs.
Debt Refinance Loan
A loan used to pay off an existing debt, typically to secure lower interest rates, extend repayment terms, or improve cash flow.
Depreciation
The reduction in value of a tangible asset over time due to wear, age, or obsolescence. It is recorded as an expense on financial statements.
Director
A person elected or appointed to oversee the activities of a corporation. Directors have fiduciary responsibilities and help guide strategic decisions.
Dividend
A portion of a corporation’s profits distributed to shareholders. Dividends can be paid in cash or additional shares and are subject to tax.
Equity
The ownership interest in a business after liabilities are subtracted from assets. Equity can come from personal investment or retained earnings.
Expenses
The costs incurred by a business in the process of earning revenue, including wages, rent, utilities, and materials. Expenses are recorded on the income statement.
FICO SBSS Score
A small business credit score used by lenders to assess the credit risk of a business applicant. It combines data from personal and business credit reports with financial and application information. In Canada, similar metrics may be used but not directly through FICO SBSS.
Financial Statements
Documents that present the financial performance and position of a business. Key statements include the balance sheet, income statement, and cash flow statement.
Financing
The act of providing or obtaining funds for business purposes, such as operations, expansion, or equipment purchases. Financing can be debt-based (loans) or equity-based (investment).
Fixed Assets
Tangible long-term assets used in the operations of a business, such as buildings, vehicles, or machinery. These are not expected to be converted to cash within a year.
Fixed Costs
Business expenses that remain constant regardless of output, such as rent, insurance, and salaried wages.
Fiscal Year
A 12-month accounting period that businesses use for financial reporting and tax purposes. It may or may not align with the calendar year.
Funding
The capital provided to a business, whether through loans, grants, investments, or alternative sources. Funding helps cover startup costs, growth, and ongoing operations.
Gross Income
Total revenue a business earns before subtracting any expenses or deductions. It is often the starting point for calculating net income.
Gross Margin
A profitability ratio calculated as gross income minus the cost of goods sold, expressed as a percentage of revenue.
GST/HST (Goods and Services Tax / Harmonized Sales Tax)
A value-added tax in Canada. GST is federal (5%), while HST combines federal and provincial rates in participating provinces. Businesses may need to collect, report, and remit GST/HST.
Income Statement
A financial report that summarizes a business’s revenues, expenses, and profits over a specific period. Also known as a profit and loss statement.
Input Tax Credit (ITC)
A credit businesses can claim to recover GST/HST paid on business-related purchases and expenses.
Interest Rate
The cost of borrowing money, expressed as a percentage of the principal. It affects loan payments and varies based on credit risk and market conditions.
Inventory
Goods held by a business for sale or use in production. Inventory is recorded as a current asset.
Invoice Factoring
A financing method where a business sells its unpaid invoices to a third party (factor) at a discount in exchange for immediate cash. Read about how online invoice factoring for small businesses works.
Invoice Financing
A form of short-term borrowing where a lender advances cash against a business’s outstanding invoices, which remain on the company’s books.
Invoice
A document issued by a seller to a buyer indicating products or services provided, along with payment terms and the amount due.
Lease
A contractual agreement where one party pays to use an asset (like equipment or property) owned by another for a set period.
Liabilities
Financial obligations of a business, including loans, accounts payable, and other debts. Liabilities are recorded on the balance sheet.
Line of Credit
A flexible financing arrangement where a business can borrow up to a pre-approved limit and pay interest only on the funds used. Find out more about business line of credit.
Liquidity
A measure of a business’s ability to meet short-term obligations using its current assets.
Loan
A sum of money borrowed from a lender, to be repaid over time with interest. Loans can be secured or unsecured depending on whether collateral is involved.
Merchant Cash Advance (MCA)
An alternative financing option where a business receives a lump sum in exchange for a percentage of future credit/debit card sales. Repayments are made daily or weekly. Find out more about merchant cash advance.
Microloan
A small, short-term loan typically offered to startups or small businesses with limited credit history. Microloans help cover initial costs and working capital. Read more about microloans.
Microlending
The practice of providing small loans to individuals or businesses that may not qualify for traditional financing. Often used in community or peer-based lending programs. Read more about microlending.
Microbusiness
A very small business, often with fewer than five employees. Microbusinesses are common in Canada and are a major part of the small business ecosystem.
Mortgage
A long-term loan used to purchase or refinance real estate. In business, mortgages may be used to acquire commercial property or buildings.
Net Income
The amount of profit remaining after all expenses, including taxes and interest, have been deducted from total revenue. It represents the business’s bottom line.
Net Profit Margin
A financial ratio calculated by dividing net income by total revenue. It shows how much of each dollar earned translates into profit after expenses.
Nuans Report
A mandatory document used in Canada to determine if a proposed business or corporation name is unique. It includes a comparison with existing registered names and trademarks.
Operating Expenses
Day-to-day costs incurred in running a business, such as rent, wages, utilities, and administrative expenses. These are necessary to maintain core operations.
Overhead
Indirect business expenses not directly tied to producing goods or services. This includes rent, insurance, and office supplies.
Partnership
A business structure where two or more individuals share ownership and responsibilities. Partners split profits, losses, and decision-making duties.
Payroll
The total compensation a business pays to employees, including wages, salaries, bonuses, and deductions such as taxes and benefits.
Personal Guarantee
A legal commitment by a business owner or director to repay a loan personally if the business cannot meet its obligations.
Profit and Loss Statement
A financial report that summarizes a business’s income, expenses, and profits or losses over a defined period. Also known as an income statement.
Promissory Note
A written, legally binding agreement in which one party promises to pay a specific amount to another under agreed terms.
Refinancing
Replacing an existing loan with a new one, typically to achieve better terms, such as a lower interest rate or longer repayment period.
Registered Office
The official address of a corporation in Canada where legal documents and government correspondence are sent. It must be a physical location.
Revenue
The total income generated by a business from its normal activities, such as sales of goods or services, before any expenses are deducted.
SR&ED (Scientific Research and Experimental Development) Tax Incentives
A federal tax incentive program designed to encourage businesses of all sizes to conduct research and development (R&D) in Canada. SR&ED provides refundable and non-refundable tax credits for eligible R&D expenditures, such as salaries, materials, and overhead costs. This program is especially relevant for tech startups and innovation-driven companies seeking to offset the cost of product or process development.
Sole Proprietorship
A simple business structure where one individual owns and operates the business. The owner is personally liable for all debts and obligations.
Small Business Deduction (SBD)
A tax benefit available to Canadian-controlled private corporations on the first $500,000 of active business income, reducing the corporate tax rate.
Small Business Loan
A financing option designed to support small businesses with operational or growth-related expenses. Offered by banks, credit unions, and alternative lenders. Find out more about small business loans.
Start-up
A newly established business, often focused on innovation and rapid growth. Start-ups typically require external funding and operate under higher risk.
Taxable Income
The portion of a business’s income subject to tax after deductions and exemptions are applied.
Term Loan
A loan with a fixed repayment schedule and duration, commonly used for major investments such as equipment or property. Learn more about term loans.
Variable Costs
Business expenses that fluctuate based on production or sales volume, such as raw materials and commissions.
Venture Capital
Investment provided by firms or individuals to high-potential start-ups in exchange for equity. It typically involves greater risk and long-term involvement.
Working Capital
The difference between a business’s current assets and current liabilities. It measures the company’s short-term financial health and liquidity.
Understanding the language of business is more than just knowing definitions — it’s about empowering yourself to make confident, informed decisions. Whether you’re applying for a small business loan, speaking with investors, or planning long-term growth, having a solid grasp of financial and operational terminology gives you a clear advantage.
At Greenbox Capital, we believe that informed business owners make stronger, smarter choices. That’s why we created this glossary — to support Canadian entrepreneurs on their journey with clarity and confidence.
Need Funding or Guidance?
If you’re looking for fast, flexible funding options or simply have questions about how these terms apply to your business, we’re here to help.
Contact Greenbox Capital today to speak with our team and explore financing solutions tailored to your goals.
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