The vocabulary, defined plainly

EBITDA

Earnings before interest, taxes, depreciation and amortization. The profit figure a lender underwrites an acquisition loan against, because it approximates the cash the business throws off before financing choices.

DSCR

Debt service coverage ratio: whether net income covers interest and principal over the life of the loan. On the Raises.com capital markets episode, 1.0 is described as the bare minimum, meaning payments are exactly covered, and lenders want around 1.15 so a balance accumulates and the company can still pay through a downturn.

LOI

Letter of intent. A non-binding agreement to pursue a purchase that opens a diligence period, described on the episode as 40 to 50 days, without committing money.

PSA

Purchase and sale agreement. The binding contract. Signing one before an LOI can require six figures into escrow just to see the books; the example given on the episode is $150,000 within five to seven days.

Senior debt

The first-position loan, secured against the assets and repaid before everything else. On lower middle market acquisitions some groups underwrite a term loan at about 3x EBITDA.

Junior unsecured capital

Debt that sits below the senior secured lender in priority and is not backed by specific collateral, so it prices higher. Revenue-based financing is one form.

Revenue-based financing

A loan sized against yearly revenue rather than profit. Multiple private credit groups polled on the episode converge at 10 to 12% of yearly revenue as the loan amount, priced around 12 to 15% interest.

Merchant cash advance

A short-term advance repaid from receipts, at rates described on the episode as 30% and sometimes 50%. Usually the first thing a refinancing is designed to retire.

Asset-based lending

Borrowing against the assets themselves. On trades and manufacturing, advance rates of 70 to 80% against heavy assets are described on the episode.

Advance rate

The share of an asset's value a lender will actually lend against. It is the number that decides how much collateral is worth to a deal.

Seller note

Part of the purchase price the seller agrees to be paid over time rather than at closing. It fills the gap between the senior loan and the equity, and it keeps the seller invested in the handover.

Rollover equity

Equity the seller keeps in the business after the sale instead of taking all cash. It reduces the cash needed at closing and aligns the seller with the buyer's outcome.

Co-GP equity

A co-investor alongside the general partner. Financing products exist where the sponsor brings 10% and the co-GP investor brings 90% of the equity stack.

First loss capital

The equity position that absorbs losses before anyone else. It is the piece most first-time sponsors cannot fund themselves, and the reason many otherwise financeable deals stall.

SPV

Special purpose vehicle. A single-deal entity investors commit to, rather than a fund that buys many companies.

Reg D 506(c)

The exemption that allows an offering to be advertised publicly, provided every investor is accredited and that status is verified.

Proof of funds

Documentary evidence a buyer can fund their share. Lenders and sellers increasingly ask for it early, alongside equity and collateral.

Data room

The organized diligence package a lender or investor reads before committing: financials, contracts, and the model behind the deal.

Definitions carrying figures are drawn from the Raises.com capital markets episode at raises.com/podcast/tre-brown-capital-markets. Plain definitions are standard market usage.