Primary Terms
- Add-backsExpenses added back to profit to show what an owner really earned.
- AmortizationThe schedule repaying a loan's principal, more with each payment.
- CIM (Confidential Information Memorandum)The broker's marketing document, shared after an NDA and written to sell.
- Consulting agreementA paid contract keeping the seller on as an advisor, not an owner.
- Customer concentrationHow much of the revenue rides on the largest customer or few.
- DSCR (Debt Service Coverage Ratio)Cash available for debt payments divided by the payments themselves.
- Due diligenceThe phase between LOI and closing where the price gets checked.
- EarnoutPrice paid only if the business hits agreed targets after closing.
- EBITDAProfit before interest, taxes, depreciation, and amortization.
- Equity injectionThe cash a buyer puts in, usually a tenth of an SBA-financed deal.
- Escrow / holdbackPurchase money held at closing to cover claims that surface later.
- Full standbyA seller note that receives no payments while the SBA loan runs.
- GoodwillThe part of a price paid above the hard assets, for the earnings.
- LOI (Letter of Intent)A mostly non-binding letter agreeing price and key terms; it starts exclusivity.
- MultipleThe ratio of price to earnings a business is priced at.
- NDA (Non-Disclosure Agreement)A confidentiality contract signed to see a listing's name and financials.
- Non-compete (seller)The seller's promise not to start or join a rival, for a set time.
- Personal guaranteeYour promise to repay the loan personally if the business cannot.
- Prime rateThe benchmark variable SBA loans are priced against, plus a spread.
- Proof of fundsDocumentation that your cash for the deal exists and is yours.
- Purchase agreement (APA/SPA)The binding contract that governs the sale and any later dispute.
- QoE (Quality of Earnings)An accounting review that verifies the earnings you are paying for.
- Reps & warrantiesThe seller's statements of fact, with indemnity if they prove false.
- RetradeCutting an agreed price after the LOI, usually on a diligence finding.
- SBA 7(a) loanThe government-guaranteed loan most small acquisitions run on.
- SDE (Seller's Discretionary Earnings)Owner earnings: profit with the owner's pay and perks added back.
- Search fundInvestors fund the search and the deal; the searcher earns equity in return.
- Self-funded searchSearching on your own money and keeping most of the ownership.
- Seller notePart of the price the seller finances, repaid to them after closing.
- Working capitalThe cash the business runs on day to day: receivables and stock, less payables.
- Working capital pegThe working capital the business must be delivered with at closing.