Search Fund Jargon Translator
Clear, plain-English definitions of ETA and dealmaking terms, with practical notes and examples.
Debt Service Coverage Ratio (DSCR)
A measure of the cash flow available to pay current debt obligations. It is calculated by dividing the company's EBITDA or operating cash flow by its total debt service (interest + principal).
Senior Debt
The most secure form of debt, which has priority for repayment in the event of bankruptcy. It is typically provided by banks and has the lowest interest rate.
Subordinated Debt
Debt that ranks below senior debt in the event of a liquidation. It carries a higher interest rate to compensate for the increased risk.
Covenant
A condition or restriction included in a loan agreement that the borrower must comply with. Failure to do so can result in a default.
Leverage Ratio
A ratio that measures a company's total debt relative to its EBITDA. It is a key indicator of a company's ability to pay off its debt.
Personal Guarantee (PG)
A legal promise by an individual to repay a company's debt in the event the company defaults. The individual's personal assets can be at risk.
SBA Loan
A type of business loan in the United States that is partially guaranteed by the Small Business Administration (SBA), a government agency. This reduces the risk for lenders.