GlossaryA practical guide to SBA loans, business acquisitions, working capital and commercial real estate. Understand the term and why it matters to your next move.
Explore financing55 terms
Common starting points: DSCREquity injectionAWG fees
Cash & working capital
A rolling schedule of expected cash receipts and payments that identifies near-term cash balances and funding needs.
Why it matters. Use actual payment dates and update the forecast against results. An annual profit figure cannot tell you whether next Friday's payroll is funded.
Cash & working capital
Current assets minus current liabilities on the balance sheet. It can include cash, short-term debt and taxes.
Why it matters. This accounting number can differ substantially from the working capital negotiated in an acquisition. Name the measure before comparing balances.
Cash & working capital
AP
Amounts owed to suppliers for goods or services already received, usually under agreed payment terms.
Why it matters. Identify overdue invoices, unrecorded liabilities and obligations the buyer assumes. Supplier terms built on the seller's relationships may change after the acquisition.
Cash & working capital
AR
Amounts customers owe for invoiced goods or services. Trade receivables are operating assets, but their recorded value does not guarantee collection.
Why it matters. Check aging, disputes, customer offsets and later bank receipts. In an acquisition, confirm whether the receivables transfer and how uncollectible amounts are treated.
Acquisitions & earnings
An adjustment intended to make reported earnings more representative of ongoing operations.
Why it matters. Evidence must support each adjustment. Normalization can reduce earnings when necessary ongoing costs, such as replacement management, are missing.
SBA & credit
The schedule used to repay loan principal over time.
Why it matters. A longer amortization can lower regular payments without extending the final maturity. Read both terms together to identify any balance due at the end.
Commercial real estate
An independent opinion of value for a defined property interest and date.
Why it matters. The result can affect financing even when buyer and seller agree on price. Identify who must commission the report and what the lender will accept.
Acquisitions & earnings
An acquisition of specified assets and assumed liabilities rather than ownership interests in the entity.
Why it matters. The agreement must identify exactly what transfers, including receivables, inventory, contracts and operating obligations. Do not assume every balance follows the business.
Cash & working capital
Unrestricted usable cash plus credit that can actually be drawn after facility conditions and borrowing limits.
Why it matters. An approved credit limit is not necessarily the amount available today. Verify access at the point when the business needs the money.
Cash & working capital
The calculation that limits borrowing against eligible assets, commonly receivables or inventory, under a credit facility.
Why it matters. Aging, concentration, reserves and exclusions can reduce available credit just when operating cash is needed. Test eligibility as well as the headline facility size.
Acquisitions & earnings
CapEx
Spending on long-lived assets such as equipment, buildings or major improvements.
Why it matters. Separate routine maintenance and replacement needs from deferred spending and optional growth investment. They have different consequences for cash and valuation.
Commercial real estate
Cap rate
Stabilized property NOI divided by price or value.
Why it matters. It is a property valuation measure, not the buyer's return after financing. Compare properties using consistent income assumptions.
Cash & working capital
CCC
The average operating funding interval, commonly calculated as inventory days plus collection days minus supplier-payment days.
Why it matters. It explains the time your business must fund operations but does not identify the lowest cash day. Use it alongside a dated cash forecast.
SBA & credit
CFADS
The defined cash available to meet loan payments after the adjustments required by the analysis.
Why it matters. Its exact construction matters. An EBITDA figure cannot automatically be substituted, and the lender's prescribed method may differ from a buyer's cash-return calculation.
SBA & credit
CDC
An SBA-approved nonprofit organization that participates in the 504 program.
Why it matters. The CDC and senior lender have distinct roles, terms and closing requirements. Coordinate both when comparing cost, timing and the cash needed from the borrower.
SBA & credit
Property pledged to support an obligation, subject to documented security rights.
Why it matters. Value, lien position and enforceability matter. Collateral does not replace the need for a workable repayment plan or establish how much a lender will advance.
SBA & credit
A lender’s written commitment to provide financing on stated terms, subject to the conditions in the letter.
Why it matters. A commitment is a milestone, not a funded loan. Review the remaining conditions, deadlines and documentation needed before closing.
SBA & credit
A written analysis of the financing request, covering the business, repayment capacity, proposed structure and key risks.
Why it matters. AWG prepares the credit memo to give lenders a clear, supported case to evaluate. It helps organize the credit discussion; the lender still makes its own approval decision.
Cash & working capital
Money received, or amounts due, before the related goods or services are delivered, creating a performance or potential refund obligation.
Why it matters. Determine who keeps the cash and who must perform or refund. The agreement may address these obligations within NWC or separately, but should avoid double counting.
Cash & working capital
DIO
An estimate of how long inventory is held before sale, based on average inventory and cost of sales for a consistent period.
Why it matters. Slow-moving, obsolete or unusable stock can make the balance sheet look stronger than the operating business. Check physical condition and saleability.
Cash & working capital
DPO
An estimate of how long the business takes to pay suppliers, using average trade payables and relevant purchases for a consistent period.
Why it matters. Delaying overdue bills can make the cash cycle look better temporarily while leaving the buyer a payment problem or damaged supplier relationships.
Cash & working capital
DSO
An estimate of how long customers take to pay, using average trade receivables and credit sales for a consistent period.
Why it matters. Slower collections can consume cash even when revenue and profit rise. Review customer terms, aging and actual receipts behind the average.
Cash & working capital
Obligations treated as debt in the transaction's price or funds-flow calculations under the agreed deal terms.
Why it matters. Seller credit-card balances paid off at closing and not transferred should be addressed as debt-like items rather than left in operating NWC. Do not count the same liability twice.
SBA & credit
DSCR
Defined cash flow divided by specified debt payments for the same period.
Why it matters. Ask which adjustments and debts are included. Senior, total-business and global coverage answer different questions, and a satisfactory ratio does not eliminate cash-timing risk.
Acquisitions & earnings
Purchase consideration linked to future conditions or results rather than being fixed and fully payable at closing.
Why it matters. The trigger, calculation, control rights and payment mechanics matter. Proposed use with SBA financing requires current eligibility and lender review.
Acquisitions & earnings
Earnings before interest, taxes, depreciation and amortization. Adjusted EBITDA also reflects separately identified normalization adjustments.
Why it matters. It is not cash available to the buyer. Capital spending, working-capital investment, cash taxes and debt payments still affect what ownership produces.
Acquisitions & earnings
EV
The negotiated value of the operating business before the agreed adjustments that determine equity consideration.
Why it matters. Cash, debt, debt-like items, working capital and transaction expenses can change the amount ultimately paid. Reconcile the price headline to the final funds flow.
SBA & credit
Capital contributed toward the transaction or project, subject to the applicable rules on eligible sources and documentation.
Why it matters. The amount and eligible sources depend on the structure. Cash contributed at closing is separate from reserves retained afterward and other costs you must fund.
Acquisitions & earnings
An acquisition of ownership interests in the business entity, which continues to hold its assets and obligations subject to the closing arrangements.
Why it matters. Trace debt payoffs, cash sweeps and liabilities remaining in the company. Counsel and tax advisers should evaluate the structure's consequences before commitment.
SBA & credit
Compensation for arranging financing with a lender.
Why it matters. At AWG, the lender pays our financing placement fee at closing. You do not pay AWG a placement fee. Any additional advisory work is agreed separately at the outset, if applicable. Lender fees and third-party closing costs are separate.
Commercial real estate
Temporary funding before permanent financing is completed.
Why it matters. In a 504 transaction, establish who funds the interim period, its costs and its repayment conditions. Include the timing in the closing plan.
Acquisitions & earnings
LOI
A document outlining proposed transaction terms before the definitive agreement.
Why it matters. Some provisions can be binding. Have counsel review exclusivity, confidentiality, deposits and other commitments before signing, even when the purchase itself remains conditional.
Commercial real estate
LTC
Debt compared with defined project costs.
Why it matters. It differs from LTV because project cost and property value can differ. Establish which costs qualify for the calculation.
Commercial real estate
LTV
Debt compared with the accepted value of the collateral.
Why it matters. Confirm which valuation and senior liens the calculation uses. A purchase price and an accepted appraised value can differ.
SBA & credit
Maturity is the final due date. A balloon is the unpaid balance due then when regular payments have not fully repaid the debt.
Why it matters. Identify a credible source for that payment. Refinancing may be an option, but its future availability and terms should not be assumed.
Commercial real estate
NOI
Property income after operating expenses, before debt service and income taxes.
Why it matters. Confirm the treatment of replacement reserves when comparing underwriting calculations. NOI is not the owner's cash return after financing.
Cash & working capital
Operating NWC
The money tied up in the operating cycle: typically receivables, inventory and operating prepayments, less trade payables and operating accruals.
Why it matters. Growth can absorb cash through these accounts before the business collects the extra revenue. Identify the included accounts before comparing two numbers.
Commercial real estate
OOCRE
Business property occupied by the borrower or a related operating company.
Why it matters. For SBA financing, confirm current occupancy and eligibility requirements for the specific project. Evaluate the building commitment alongside the operating business's cash needs.
SBA & credit
A person's contractual commitment to repay an obligation according to its terms.
Why it matters. It is distinct from the SBA guaranty and from property pledged as collateral. Ask the lender and counsel to explain the actual scope and consequences.
Commercial real estate
Phase I ESA
A review of property history and conditions to identify potential environmental concerns.
Why it matters. Further investigation may be necessary. It is not a guarantee of clean property, and findings can affect timing, cost and financing.
Acquisitions & earnings
QoE
Financial diligence examining earnings, accounting practices and related issues within an agreed scope.
Why it matters. The work helps test the numbers but does not replace legal, operational or commercial diligence. Confirm the scope and lender's report requirements before commissioning it.
Cash & working capital
An amount withheld from payment until specified contractual conditions are met.
Why it matters. Collection may occur well beyond ordinary invoice terms. Confirm release conditions and who bears collection risk after closing before treating the balance as near-term cash.
Cash & working capital
The buyer's accessible personal funds remaining outside the transaction after their contribution and costs.
Why it matters. Keep this separate from cash funded into the business and money committed to other obligations. The same dollar cannot serve as equity and a personal reserve.
SBA & credit
A financing program primarily for eligible long-lived fixed assets, such as owner-occupied property and equipment.
Why it matters. Its structure differs from 7(a). Working capital and inventory require separate financing, and the bank and CDC portions need to be considered together.
SBA & credit
Financing made by a participating lender with an SBA guaranty. Eligible purposes can include ownership changes, working capital, real estate and debt refinancing.
Why it matters. The guaranty supports the lender. It does not remove your repayment obligation or guarantee approval; the business, buyer and structure must meet applicable requirements.
SBA & credit
Financing provided by the seller for part of the purchase consideration.
Why it matters. Interest, payment timing, maturity, security and restrictions must fit the buyer's cash flow and senior lender's requirements. Deferred payment does not make the obligation disappear.
Acquisitions & earnings
SDE
An earnings measure commonly adjusted for one working owner's compensation and selected expenses, with the exact adjustments stated separately.
Why it matters. A buyer who needs replacement management must account for that ongoing cost. All reported SDE is not automatically spendable owner income.
SBA & credit
A schedule showing where all transaction funding comes from and exactly what it pays for.
Why it matters. Include operating cash, fees and other applicable costs, not only the purchase price. Reconcile the schedule to the equity evidence and final closing documents.
SBA & credit
A documented restriction on payments to a creditor for a specified period or under specified conditions.
Why it matters. A seller note does not become qualifying equity merely because the parties call it standby. The written terms must satisfy the applicable program and lender requirements.
SBA & credit
An agreement making one creditor's payment or security rights junior to another's.
Why it matters. Subordination and standby address different issues. A junior claim can still have scheduled payments unless the documents also restrict them.
Acquisitions & earnings
TTM
The latest continuous twelve-month reporting period. It differs from year-to-date results and a completed fiscal year.
Why it matters. Label the exact dates and compare periods consistently. A recent TTM view can reveal changes that the last tax return alone does not show.
Cash & working capital
Transaction NWC
The specifically agreed current operating assets and liabilities that transfer under the purchase agreement.
Why it matters. The contract defines the measure. A seller's balance-sheet caption does not establish what you acquire, assume or pay for.
Cash & working capital
WIP
Unfinished production or work on customer jobs. The term can describe physical inventory, a conditional contract asset or another type of balance.
Why it matters. Verify ownership, billability, remaining costs and collection timing. An unfinished job may consume cash after closing even when the seller has already recorded revenue.
Cash & working capital
The agreed amount of transaction working capital the seller should deliver at closing.
Why it matters. Test both the amount and the quality of its accounts against seasonality and business scale. A historical average is a starting point, not an automatic answer.
Cash & working capital
A purchase-price adjustment comparing delivered working capital with the agreed peg under the contract's calculation and settlement rules.
Why it matters. A later price credit can correct the economics without providing cash in time for your first payroll. Model when the money is actually received.
Start here