# Glossary

This is educational. Definitions here are plain language, not statutes.

**SDE.** Seller's discretionary earnings. Profit plus owner compensation and certain personal or one-time costs, minus a replacement wage when the buyer will not do the job.

**EBITDA.** Earnings before interest, taxes, depreciation, and amortization. More common once a company has a management layer and the owner is not the whole adjustment.

**Multiple.** Asking price divided by SDE or EBITDA. Real estate should be stated beside it, not buried inside it, or the multiple lies.

**Add-back.** A cost in the statements that a buyer is asked to ignore. It needs evidence.

**DSCR.** Debt-service coverage ratio. Cash flow divided by the year's loan payments.

**IOI / LOI.** Indication of interest, then letter of intent. The second one is the document counsel argues about.

**CIM.** Confidential information memorandum. The story behind the teaser, after an NDA.

**QoE.** Quality of earnings. A CPA's review of whether the earnings are real.

**Asset sale / stock sale.** What is being bought. See the tax primer. It changes liabilities and taxes.

**7(a).** An SBA loan program often used to buy a small company. The lender decides. NewHands does not.

**Teaser.** The public card. Enough to decide to sign an NDA, not enough to call the largest customer.