Search Fund Jargon Translator
Clear, plain-English definitions of ETA and dealmaking terms, with practical notes and examples.
Search Fund
An investment vehicle through which an entrepreneur (the 'searcher') raises a small amount of capital from investors to search for, acquire, and operate a privately held company.
Seller Note
A loan provided by the seller to the buyer to cover a portion of the purchase price. It demonstrates the seller's confidence in the business's future success.
Seller's Discretionary Earnings (SDE)
A measure of a business's total financial benefit to one full-time owner-operator. It's calculated by taking EBITDA and adding back the owner's salary and other discretionary expenses.
Self-Funded Search
A model of ETA where the searcher uses their own funds (or funds from a small, informal group) for the search phase and raises acquisition capital on a deal-by-deal basis.
Sources and Uses
A table that summarizes where the money for an acquisition is coming from (Sources) and how it is being spent (Uses). The total sources must equal the total uses.
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.
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.