Definitions
Acquisition terms, explained
Short, honest definitions of the vocabulary brokers, lenders and attorneys use — written for a buyer who has to act on the term, not for a dictionary. Each one links to the guide that puts it to work.
All 28 terms
Add-back
An expense the seller ran through the business that's added back to net profit to reflect the true cash flow available to a new owner.
Read → DefinitionAsset purchase
In an asset purchase you buy named assets — equipment, inventory, customer lists, goodwill — and the seller keeps their legal entity along with most of its…
Read → Glossary — NYS-specificBulk-sale notice (NYS)
The NYS process that protects a business buyer from the seller's unpaid sales tax liability. Also called the successor-liability process.
Read → DefinitionCertificate of Authority (NYS sales tax)
A Certificate of Authority is the New York permit that lets a business collect sales tax and issue or accept exemption certificates. The point every buyer needs:…
Read → GlossaryChange of ownership
The SBA's term for a transaction in which ownership of a business changes hands. It matters because it triggers a distinct rule set: a 10% equity injection that,…
Read → GlossaryDSCR — Debt-Service Coverage Ratio
The ratio of business cash flow to annual debt service. For an initial acquisition, SBA requires at least 1.25:1 on the last fiscal year-end or a two-year…
Read → DefinitionEarnout
An earnout makes part of the purchase price depend on a defined result after closing. Used well, it bridges one specific, measurable uncertainty — a customer…
Read → GlossaryEBITDA — Earnings Before Interest, Taxes, Depreciation, and Amortization
A normalized earnings measure used for larger, manager-run businesses — typically those above ~$1M in earnings.
Read → GlossaryEquity injection
The buyer's own money going into the transaction. On an SBA 7(a) Initial Acquisition it is 10% of total project cost, and SOP 50 10 8.1 states it cannot be…
Read → DefinitionEquity purchase
In an equity purchase you buy the ownership of the company itself — the shares or membership interests — rather than its assets. The entity continues unchanged,…
Read → DefinitionEscrow
Escrow is money held by a neutral third party until an agreed condition is met. A New York business acquisition typically uses it three ways: to hold the buyer’s…
Read → DefinitionEstoppel certificate
An estoppel certificate is a signed statement from the landlord confirming the current facts of a lease: the rent, the remaining term, the security deposit held,…
Read → DefinitionUI experience rating (and the NYS-100)
Your unemployment-insurance contribution rate is not a fresh-start number. When you acquire a New York business, the Department of Labor says that on a total…
Read → DefinitionFDD — Franchise Disclosure Document
The Franchise Disclosure Document is the pre-sale disclosure a franchisor must give you “at least 14 days before you are asked to sign any contract or pay any…
Read → GlossaryGoodwill
The intangible value of a business above the fair market value of its tangible assets — brand, customer base, trained workforce, location, reputation, systems.
Read → GlossaryHoldback
Purchase price you do not pay at closing, released later once agreed conditions are met. It is what turns an indemnity from a promise into something funded. Size…
Read → GlossaryIndemnity
A promise by the seller to make you whole if a defined thing goes wrong. It is worth exactly as much as the seller's ability and willingness to pay on the day…
Read → GlossaryLOI — Letter of Intent
A non-binding agreement that sets the purchase price, structure, and diligence timeline before the formal purchase agreement. Also called a term sheet or…
Read → GlossaryNDA — Non-Disclosure Agreement
A confidentiality agreement signed before a seller will release financials, customer lists, or business identity to a potential buyer. Also called a…
Read → GlossaryProject cost
The total cost of the acquisition — purchase price plus the other costs being financed. It matters because the SBA equity injection is calculated on project…
Read → DefinitionPurchase price allocation (Form 8594)
Purchase price allocation is how the total price of a business is divided across categories of assets for tax purposes. The IRS uses a residual method with seven…
Read → GlossaryQoE — Quality of Earnings
A CPA-led reconstruction of a business's real cash flow — separate from the tax return or broker-prepared P&L. The number a SBA lender will actually use to…
Read → GlossaryRepresentations and warranties
The seller's statements of fact in the purchase agreement — that the financials are accurate, the taxes are paid, the licences are valid, there is no undisclosed…
Read → GlossarySDE — Seller's Discretionary Earnings
The total cash benefit to the owner of a small business. Used as the valuation basis for owner-operated businesses, typically those under ~$1M in earnings.
Read → GlossarySeller note
Part of the purchase price the seller lends you rather than receiving at closing. Common, useful, and governed by terms that matter more than the amount: whether…
Read → GlossaryStandby agreement
The agreement that subordinates a seller's note to the SBA loan. On full standby, no payments of principal or interest are made for the term of the 7(a) loan —…
Read → DefinitionUCC-1 financing statement
A UCC-1 is a public filing that, in the New York Department of State’s words, gives “notice that a creditor has or may have an interest in the personal property…
Read → GlossaryWorking capital
Current assets minus current liabilities. The cash a business needs to fund daily operations — and a real line item in the buyer's total cash needed at closing.
Read →Talk to an advisor
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