Tim Delaney breaks down eight of the most common terms you'll encounter when buying a small business — SDE, EBITDA, LOI, APA, escrow, SBA loans, seller financing, and working capital.

If you've ever looked at a business-for-sale listing and felt like you were reading another language, this episode is your translator. Tim explains how these terms connect to real valuations and smarter deal-making so you can speak the broker's language and protect yourself before signing anything.

Tim is an entrepreneur who believes everyone should explore the opportunities that business and real estate can provide on the path to financial freedom. He owns and operates a wine & liquor store, a software startup, a consulting company, and a growing portfolio of commercial and residential real estate.

Tim's passion for independent business has led him to support dozens of other business owners. For over a decade, he has worked with businesses on strategy, processes, finances, and marketing. These experiences, along with analyzing dozens of other businesses for potential acquisition, have provided Tim with an immense knowledge base to pull from.

Tim has appeared on multiple top-tier podcasts in the financial space, such as Bigger Pockets Money and The Freedom Chasers Podcast.

[00:00 – 00:22] The "Alphabet Soup" Problem

"If you've ever looked at a business listing online and felt like you are reading some secret foreign language… you're not alone." Tim sets up the problem—new buyers face a wall of jargon that hides the real meaning of a deal.

[00:22 – 00:58] Why These Terms Matter

Understanding the language of deals helps you avoid costly mistakes and recognize red flags early.

[00:58 – 03:12] Seller Discretionary Earnings (SDE)

What SDE includes, how different people calculate it, and why multiples like 1×–3× SDE determine business value.

[03:12 – 04:37] EBITDA (for Larger Businesses)

Used when an owner isn't active day-to-day. "EBITDA… earnings before interest, taxes, depreciation, and amortization."

[04:37 – 06:34] LOI – Letter of Intent

The "informal-formal" agreement outlining price, terms, and exclusivity. "Think of it like being engaged—you're not married yet, but you shouldn't be dating other buyers."

[06:34 – 07:28] APA – Asset Purchase Agreement

Where the lawyers finalize the actual contract and list what's included—customer lists, goodwill, equipment, etc.

[07:28 – 08:53] Escrow

Funds held back to ensure promises (like purchase orders or key employees staying) are met after closing.

[08:53 – 09:51] SBA Loans

How SBA 7(a) loans really work: banks issue them, SBA guarantees them, and lenders care most about cash flow.

[09:51 – 11:00] Seller Financing

"When the seller becomes the bank for you." Examples of partial financing and why the SBA likes sellers with "skin in the game."

[11:00 – 12:12] Working Capital

Cash + receivables + inventory = the lifeblood of your new business. Tim explains why it must be clearly defined in the APA to avoid liquidity traps.

[12:12 – End] Closing Thoughts & CTA

"We'd love to hear what other terms you've seen or heard that you aren't quite sure about!" If you found value in today's show, make sure to subscribe so you never miss an episode packed with insights to help you buy and grow a business that creates real financial freedom.

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Tweetable Quotes

• "Understanding them isn't just about the jargon. It's about making smarter deals, avoiding bad deals, and knowing exactly what you're signing up for." - Tim Delaney

• "An LOI is kind of like being engaged — you haven't done the formal wedding yet." - Tim Delaney

• "Seller financing is when the seller becomes the bank for you." - Tim Delaney

• "Without working capital, the business will die." - Tim Delaney