The SBA acquisition glossary

The profit a business generates for one owner-operator, before their own salary, interest, taxes, and one-time items. It is the earnings base almost every SBA acquisition is underwritten on, and the number a broker's asking price is usually a multiple of.

Earnings before interest, taxes, depreciation, and amortization. Unlike SDE, it already assumes a market-rate manager runs the business, so it does not add the owner's salary back. Larger deals are quoted on EBITDA; Main Street deals on SDE.

Purchase price divided by SDE, the shorthand brokers quote. Main Street businesses commonly trade around two to four times SDE. The multiple only means something next to the debt coverage it produces: a low multiple that still fails DSCR is not a good price.

Expenses added back to reported profit because they will not carry over to the new owner: the departing owner's personal costs, one-time expenses, the pay of people leaving with the seller. Lenders credit only the add-backs they can verify against records.

SDE minus a loaded salary for whoever actually runs the business after close, plus verifiable adjustments. This is the cash the bank counts on to make loan payments, and the numerator of DSCR.

Cash the business needs on day one to cover receivables, work in progress, and payroll until customer payments catch up. SBA lets you finance it inside the 7(a) loan, and it counts toward total project cost.

The full cost of the deal, not just the sticker price: the purchase price plus the guaranty fee, closing costs, and any working capital. It sets both the financing you need and the equity you must inject.

Inventory taken out of the purchase price and bought from the seller at book value as it sells, under a separate agreement. It lowers the amount you finance. Structure it as a supply agreement, not contingent purchase price, or it can trip the SBA earnout ban.

The SBA's flagship guaranteed loan, and the usual way to finance a business acquisition. A bank makes the loan and SBA guarantees a large share of it. It is capped at $5M and, for a business-only deal, typically amortized over ten years.

A loan for deals that include real estate or major equipment, funded in a stack: roughly 50% from a bank, 40% from a CDC debenture, and 10% from the buyer. Used less often than the 7(a) for a pure business acquisition.

The share of a 7(a) loan SBA stands behind if it defaults: 85% on loans up to $150,000 and 75% above that. It is what makes a bank willing to lend against goodwill, and the base the guaranty fee is charged on.

An upfront fee SBA charges on the guaranteed portion of the loan, rising with loan size on the FY2026 schedule, and usually financed into the loan. There is no general small-loan waiver; the current tiers are on the rates page.

The Federal Reserve's bank prime loan rate, 6.75% as of August 13, 2026, the benchmark most 7(a) loans price over. The site refreshes it monthly from FRED, so every tool quotes the same Prime.

The spread a lender adds on top of Prime to set your rate. Real 7(a) acquisition deals typically land between 1.75 and 2.5 points over Prime. Measured at approval, the margin stays comparable as Prime moves, unlike the raw rate.

The schedule that pays a loan down to zero over its term through level monthly payments. A longer amortization means a smaller payment and easier coverage, which is why SBA-friendly deals stretch terms toward ten years.

Money the seller lends you, repaid monthly with interest, to bridge the gap between the price and what the bank plus your cash cover. It keeps the seller invested in a smooth handoff, and it is one of the strongest levers in a deal.

A seller note with no payments for a set period, often the life of the SBA loan. Because it adds nothing to early debt service it lifts coverage, and SOP rules let a note on full standby count toward your equity injection, up to half the requirement.

Years at the start of a loan when you pay interest but no principal. Because the bank underwrites Year 1, an interest-only period on the seller note lifts Year-1 DSCR and can make a marginal deal bankable.

The buyer's own money in the deal. SOP rules require an injection equal to 10% of total project cost. Cash and borrowed funds count in full; a seller note on full standby counts only up to half of the requirement.

Money you borrow personally, for example against a brokerage account or your home, and put into the deal as equity. SBA allows it as long as repayment comes from outside the business, so the carry cost is yours personally, not the company's.

Cash flow available for debt service divided by annual loan payments. It is the coverage test every SBA acquisition is approved on: below the floor, the loan does not get made. A DSCR of 1.25x means the business throws off $1.25 of cash for every $1 of debt payment.

The minimum coverage SBA will approve. The floor is 1.15x through September 30, 2026; SOP 50 10 8.1 raises it to 1.25x for acquisitions from October 1, 2026, and measures it on historical results, not projections.

Twelve months of every acquisition-debt payment: the SBA loan, the seller note, and any other deal debt. It is the denominator of DSCR, the figure the bank divides your cash flow by.

The gap between the most debt service your cash flow could carry at the SBA floor and what your structure actually owes in Year 1. Negative headroom means the structure has to change: a smaller loan, a longer term, or an interest-only seller note.

A promise that you will repay the loan personally if the business cannot. SBA requires it from everyone owning 20% or more of the buyer, which is why an SBA loan puts your own assets, not just the company's, on the line.

An independent accountant's verification that a seller's reported earnings are real and repeatable. Under SOP 50 10 8.1 it is required on larger acquisitions, generally those of $3M and up, and it is money well spent on any deal priced off aggressive add-backs.

The two-sided budget of a deal: where the money comes from (loans, seller financing, your cash) and where it goes (price, fees, closing costs, working capital). The two sides must equal for the deal to close.

The SBA's own label for an acquisition loan: a loan whose purpose is buying an existing business rather than starting or expanding one. It is the population most of this site's data is about.

A loan that went bad and SBA wrote off as a loss. Charge-off rates on this site are counts: loans charged off divided by loans approved in a cohort. It is the closest thing the federal data has to a failure rate.

Authority SBA grants experienced lenders to approve loans in-house, under the Preferred Lender Program, without sending each one to SBA first. Delegated lenders are usually faster to close.

Assets pledged to secure a loan. SBA will not decline an acquisition for a lack of collateral when the cash flow covers the loan, but it takes what is available, often including a lien on the buyer's home if there is equity in it.

When a lender sells the guaranteed portion of a 7(a) loan to investors after closing. It is a funding mechanic on the bank's side and does not change the borrower's terms; it appears as a flag in the federal loan file.

SBA's rulebook for how 7(a) loans are made: eligibility, equity, coverage, and structure. The current edition is SOP 50 10 8.1, effective October 1, 2026. When the SOP changes, what counts as a bankable deal changes with it.

The federal fiscal year, running October 1 through September 30. FY2026 began October 1, 2025. Every year label on the data pages follows this calendar, not the January one.