Glossary
26 terms
- Add-back
- An adjustment that adds a non-cash, discretionary or non-recurring expense back to reported net income to arrive at cash flow available for debt service.
- Affiliation
- The SBA rule set under 13 CFR 121.301 that aggregates businesses under common ownership or control for size and eligibility purposes.
- CDC
- Certified Development Company, the nonprofit that originates and services the SBA-guaranteed second lien in a 504 project.
- CFADS
- Cash flow available for debt service: EBITDA plus substantiated add-backs, less taxes, distributions and maintenance capital expenditure where the lender requires.
- Credit elsewhere
- The SBA requirement that the lender certify the borrower cannot obtain the loan on reasonable terms from non-federal sources without a guaranty.
- Credit memo
- The lender-facing document presenting the borrower, transaction, financial analysis, collateral, risks and recommendation.
- DSCR
- Debt service coverage ratio: cash flow available for debt service divided by total annual principal and interest.
- EBITDA
- Earnings before interest, taxes, depreciation and amortization.
- EPC / OC
- Eligible passive company and operating company. The EPC holds real estate and leases it to the OC that runs the business.
- Equity injection
- The borrower's cash or qualifying contribution to a project, typically a minimum of 10% on a change of ownership.
- Form 1919
- SBA Borrower Information Form completed by the applicant business and each principal.
- Form 413
- SBA Personal Financial Statement required from each guarantor and 20%+ owner.
- Form 1920
- SBA Lender's Application for Loan Guaranty.
- Form 159
- SBA Fee Disclosure and Compensation Agreement for packagers, brokers and agents.
- Form 4506-C
- IRS form authorizing an IVES participant to obtain tax transcripts for verification.
- Global cash flow
- Combined cash flow of the business, its affiliates and the guarantors' households, measured against all of their debt service.
- Guaranty fee
- The upfront fee SBA charges on the guaranteed portion of a 7(a) loan, scaled by loan size and maturity.
- IVES
- The IRS Income Verification Express Service through which lenders obtain transcripts.
- PLP
- Preferred Lender Program, which delegates 7(a) credit decisions to approved lenders.
- Prime + spread
- SBA 7(a) variable pricing expressed as the Wall Street Journal prime rate plus a maximum spread set by loan size.
- SDE
- Seller's Discretionary Earnings: EBITDA plus one working owner's total compensation and discretionary expenses, used in Main Street valuations.
- SOP 50 10
- SBA's Standard Operating Procedure governing 7(a) and 504 loan origination; version 7.1 is current.
- Source & Use
- A table reconciling where project funds come from (loan, injection, seller note) and what they pay for.
- Spread (financial)
- A standardized restatement of financial statements into a lender's chart of accounts across multiple periods.
- Standby agreement
- An agreement subordinating a seller note to the SBA loan, often with no payments for a defined period.
- TTM
- Trailing twelve months: the most recent twelve months of results built from interim and prior-year statements.