Glossary
The lending compliance & case-processing glossary
Plain-language definitions of the compliance, governance, and case-lifecycle terms that matter to non-bank lenders — with how Hadrian operationalizes each.
Adverse Action Notice
An adverse action notice is the disclosure a lender must send when it denies, terminates, or unfavorably changes credit — required under ECOA/Reg B and the FCRA.
Regulation B
Regulation B implements the Equal Credit Opportunity Act — governing how creditors take applications, make decisions, notify applicants, and retain records.
ECOA
ECOA is the federal law prohibiting credit discrimination and requiring lenders to notify applicants of adverse action — implemented by Regulation B.
UDAAP
UDAAP refers to unfair, deceptive, or abusive acts or practices prohibited under the Dodd-Frank Act — a core compliance risk in lending and servicing.
FCRA
The FCRA governs how consumer report information is collected, shared, and used — including adverse action disclosures when a credit report affects a decision.
Evidence Graph
An evidence graph traces every decision back to the claims, evidence, sources, and confidence behind it — making AI-assisted lending decisions auditable.
Tamper-Evident Audit Log
A tamper-evident audit log records every case action in an append-only, cryptographically verifiable way, so alterations are detectable — built for regulatory defensibility.
Merchant Cash Advance (MCA)
A merchant cash advance is a financing product where a funder buys a portion of a business's future receivables at a discount — common among non-bank SMB funders.
Loan Origination System (LOS)
A loan origination system (LOS) manages the end-to-end process of taking in a credit application, verifying it, making a decision, and closing — the operational spine of lending.
Loan Management System (LMS)
A loan management system (LMS) handles post-funding servicing — repayment schedules, remittances, collections, and account management — after origination is complete.
Know Your Business (KYB)
Know Your Business (KYB) is the process of verifying the identity, ownership, and legitimacy of a business entity before extending credit or entering a financial relationship.
Debt Service Coverage Ratio (DSCR)
DSCR measures whether a borrower's income is sufficient to cover its debt payments — a core underwriting metric in commercial and real estate lending.
Factor Rate
A factor rate is the pricing mechanism for merchant cash advances — a simple multiplier applied to the advance amount to determine total repayment, not an interest rate.
Ability to Repay
Ability to repay is the principle that lenders should verify a borrower can reasonably meet their repayment obligations — a legal standard in consumer lending and a prudent underwriting principle in commercial lending.
Trust Dial
The trust dial is Hadrian's model for letting operators control how much autonomy AI has in case decisions — from fully gated human review to supervised autonomous action.
Case Lifecycle
The case lifecycle is the structured progression a deal moves through — intake, verify, decide, close — giving lenders a consistent, auditable process from first touch to funded.
Equipment Financing
Equipment financing is a category of commercial credit used to purchase or lease business equipment — typically structured as a loan or lease secured by the equipment itself.
Fannie Mae LL-2026-04
Fannie Mae LL-2026-04 is an AI governance lender letter effective 2026-08-06, requiring sellers and servicers to maintain documented controls over AI tools used in mortgage origination.
Credit Memo
A credit memo (or credit memorandum) is the internal document that summarizes an underwriter's analysis, evidence, and recommendation for a credit decision — the written record of how a deal was evaluated.
NSF (Non-Sufficient Funds)
NSF (non-sufficient funds) events in a business's bank statements signal cash flow stress — a key underwriting signal for MCA funders and small business lenders.
Underwriting
Underwriting is the process of evaluating a credit application to determine risk, set terms, and reach a fundable decision — the analytical core of every lending operation.
Loan Stacking
Loan stacking is when a borrower takes multiple simultaneous advances or loans from different funders — a leading cause of MCA default and a core underwriting risk signal.
UCC Filing
A UCC filing (UCC-1 financing statement) is a public notice that a lender has a security interest in a borrower's assets — standard practice for MCA funders and commercial lenders.
First-Position vs Second-Position Financing
First position financing means a lender has priority claim on a borrower's assets or receivables; second position funders are subordinate — a key risk distinction in MCA and commercial lending.
Reconciliation (MCA)
MCA reconciliation is the process of adjusting a merchant's remittance amount when actual sales fall below the level projected at origination — a key factor in the loan-vs-receivables-purchase characterization.
Confession of Judgment (COJ)
A confession of judgment is a contractual provision that lets a creditor obtain a court judgment against a debtor without filing a lawsuit — historically common in MCA agreements.
Holdback Rate
The holdback rate is the percentage of a merchant's daily credit card or bank deposits that an MCA funder collects as remittance — the mechanism that ties repayment to actual sales.
Time in Business
Time in business is a core underwriting criterion for MCA and small business lenders — measuring how long a business has been operating as a proxy for stability and default risk.
Average Daily Balance
Average daily balance (ADB) is the mean end-of-day balance in a bank account over a period — a key underwriting metric for MCA funders assessing a merchant's cash flow cushion.
Chargeback
A chargeback is a forced reversal of a payment transaction initiated by a card network or bank — an operational and underwriting risk for MCA funders and payment-processing businesses.
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