Business Planning Glossary (A–Z)

This comprehensive glossary defines the essential business planning, SBA lending, financial forecasting, and startup terminology every entrepreneur needs to understand. Organized from A to Z, this resource helps you write a stronger business plan, interpret lender requirements, and confidently navigate the U.S. small business landscape. Updated for 2025–2026.

A

Accounts Payable (AP)

Short-term obligations a business owes to suppliers and creditors for goods or services purchased on credit. AP appears as a current liability on the balance sheet.

Accounts Receivable (AR)

Money owed to a business by customers for goods or services delivered but not yet paid for. AR appears as a current asset on the balance sheet and directly affects cash flow.

Acquisition Loan

An SBA-backed or conventional term loan used to purchase an existing business. Lenders review historical financials, cash flow, and a lender-ready business plan before approval.

Advertising Budget

The planned spending for marketing, digital ads, print media, and promotional activities. This should align with your revenue targets and customer acquisition cost in the business plan.

Amortization

The process of spreading loan repayment (principal and interest) over a fixed schedule. An amortization schedule shows each payment and the remaining balance over time.

Assets

All items of value owned by a business—including equipment, real estate, cash, vehicles, and inventory—used to generate revenue. Assets appear on the balance sheet.

Assumptions (Financial)

The underlying variables used to build a financial forecast (pricing, sales volume, labor cost, rent, tax rates, interest rates). Lenders expect realistic, data-backed assumptions.

B

Balance Sheet

A core financial statement showing a company’s assets, liabilities, and equity at a specific point in time. Required for SBA loans and investor-ready plans.

Break-Even Point

The sales level at which a business covers all fixed and variable costs and begins generating profit. Break-even analysis helps lenders and investors assess risk.

Brand Positioning

The way a business differentiates itself in the marketplace through messaging, value, pricing, and visuals relative to competitors.

Business Credit Score

A numerical rating that reflects a business’s financial reliability. Important for qualifying for loans, trade credit, and leasing agreements.

Business Model

The framework explaining how a company operates, generates revenue, and delivers value to customers. A strong business model is central to any business plan.

Business Plan

A written document that describes a business concept, market opportunity, operating model, management team, risks, and detailed financial projections. Required for most SBA loans, banks, and serious investors.

Business Plan Template

A pre-formatted document that provides structure, sections, and sample language for writing a business plan. BPlanMaker templates include narrative guidance and 3-year financial forecasts tailored to specific U.S. industries.

Burn Rate

The rate at which a business uses cash each month, especially in the startup phase. Often measured as monthly net cash outflow and used to estimate runway.

C

Capital Expenditures (CapEx)

Long-term investments such as equipment, vehicles, furniture, build-out costs, and real estate. Included in startup cost calculations and SBA use-of-funds tables.

Cash Burn

The total amount of cash a business spends over a period (usually a month or quarter) in excess of its cash inflows. Closely related to burn rate and runway.

Cash Flow Statement

A financial report showing how money moves in and out of the business from operating, investing, and financing activities. Essential for understanding liquidity and debt service coverage.

Collateral

Assets pledged to secure a loan (equipment, real estate, vehicles, inventory). SBA lenders often require collateral when available.

Cost of Goods Sold (COGS)

Direct costs associated with producing or purchasing goods for resale (materials, wholesale costs, packaging). Impacts gross profit and pricing decisions.

Covenants (Loan Covenants)

Conditions a borrower agrees to in a loan agreement, such as maintaining certain financial ratios, reporting requirements, or restrictions on additional debt.

Credit Score (Personal)

The borrower’s personal credit rating, often evaluated for small business and SBA 7(a) loans. A stronger score improves loan approval odds and terms.

Current Ratio

A liquidity ratio calculated as current assets divided by current liabilities. Indicates a business’s ability to meet short-term obligations.

D

Debt Service Coverage Ratio (DSCR)

A key SBA underwriting metric measuring a business’s ability to cover loan payments with its operating income. A DSCR of 1.25 or higher is typically preferred.

Depreciation

A non-cash expense that spreads the cost of a long-term asset over its useful life. Impacts tax liability and net income but does not affect cash directly.

Distribution Channels

The methods by which products or services reach customers (retail storefront, e-commerce, wholesale, direct B2B, marketplaces).

Due Diligence

The research and verification process conducted by investors and lenders to validate financials, projections, operations, and risks before approving a deal.

E

EBITDA

Earnings Before Interest, Taxes, Depreciation, and Amortization. A major performance metric used in valuations, acquisitions, and lender analysis.

Equity Injection

The borrower’s required cash contribution toward total project costs (often 10%–20% for SBA loans). Demonstrates commitment and reduces lender risk.

Executive Summary

The first and most important section of any business plan, summarizing the business concept, market opportunity, competitive advantage, financial highlights, and funding request.

F

Financial Forecast

A detailed, forward-looking model of revenue, expenses, cash flow, and profitability over a defined period—commonly three years in SBA and lender-ready plans.

Fixed Costs

Business expenses that remain constant regardless of sales (rent, insurance, salaried labor, many subscriptions).

Forecast

A projection of income, expenses, and cash flow over time. A strong forecast is grounded in realistic assumptions and industry benchmarks.

Franchise

A business model where an entrepreneur licenses a proven brand, system, and support in exchange for fees and royalties. Often financed using SBA loans and a structured business plan.

G

Gross Margin

Gross profit expressed as a percentage of revenue. Calculated as (Revenue − COGS) ÷ Revenue. Helps assess pricing and cost structure.

Gross Profit

Revenue minus Cost of Goods Sold (COGS). Shows how efficiently a business converts sales into profit before operating expenses.

H

Home-Based Business

A small business operated primarily from a private residence. Common for low-cost startups and service-based operations.

I

Income Statement

A financial report showing revenue, expenses, and profit over a defined period. Also called a Profit & Loss Statement (P&L).

Interest Rate

The annual cost of borrowing money, expressed as a percentage. SBA loan rates typically use a base rate (Prime or SOFR) plus a lender spread.

Investor-Ready Business Plan

A business plan designed for equity investors, emphasizing growth potential, return on investment, exit strategy, and capital needs alongside standard market and financial analysis.

J

Joint Venture (JV)

A business partnership where two or more parties share ownership, risks, resources, and profits in a specific project or company.

K

Key Performance Indicators (KPIs)

Measurable metrics used to track business performance, such as revenue per employee, average order value, conversion rate, customer churn, and DSCR.

L

Liabilities

Debts and obligations owed by the business, including loans, accounts payable, credit lines, and accrued expenses.

Line of Credit (LOC)

A flexible financing tool that allows a business to borrow up to a set limit, repay, and borrow again. Often used for working capital needs.

Loan-to-Value (LTV)

The ratio comparing loan size to the appraised value of the collateral or property. Important for SBA loans involving real estate.

M

Market Analysis

A research section evaluating customer demographics, local demand, competitors, pricing, and industry trends. Critical for SBA and lender review.

Microloan (SBA Microloan Program)

A smaller SBA-backed loan program, typically up to $50,000, designed for very small businesses and startups that need modest funding.

Monthly Recurring Revenue (MRR)

Predictable subscription-based or membership revenue earned each month. Common in SaaS, gyms, and membership-model businesses.

N

Net Margin

Net profit expressed as a percentage of revenue. Shows how much profit a business keeps from each dollar of sales after all expenses.

Net Profit

Total earnings after all expenses, interest, and taxes are deducted. Often called the “bottom line.”

O

Operating Expenses (OpEx)

Ongoing costs required to run the business (utilities, payroll, marketing, software) excluding Cost of Goods Sold.

Owner’s Equity

The owner’s financial interest in the business, calculated as total assets minus total liabilities.

P

Personal Guarantee

A legal promise by a business owner to personally repay a loan if the business cannot. Common in SBA and small business financing.

Prime Rate

A benchmark interest rate used by banks for many loans. SBA loan rates are often expressed as Prime plus a fixed spread.

Profit & Loss Statement (P&L)

A summary of income and expenses showing net profit or loss over a period. Another name for the Income Statement.

Projections

Forward-looking estimates of revenue, expenses, and cash flow used in planning, loan applications, and investor decks.

Q

Quarterly Earnings

Financial performance reported for a three-month period. Many businesses and lenders review results quarterly to track progress against the plan.

R

Revenue Streams

Separate sources of income generated by a business (product sales, services, rentals, subscriptions).

ROI (Return on Investment)

A profitability metric measuring how much return an investment generates relative to its cost, usually expressed as a percentage.

Runway (Cash Runway)

The number of months a business can operate before running out of cash, based on current cash balance and monthly burn rate.

S

SBA 7(a) Loan

The SBA’s flagship loan program for small businesses. Requires a complete business plan, strong credit, realistic financial projections, equity injection, and a clear use-of-funds schedule.

SBA 504 Loan

An SBA loan program primarily used to finance owner-occupied commercial real estate and major fixed assets, typically through a partnership between a bank and a Certified Development Company (CDC).

SBA-Ready Business Plan

A business plan structured to meet SBA lender expectations, including an Executive Summary, company overview, market analysis, operations, management, and 3-year financial projections with a clear use of funds.

Sensitivity Analysis

An exercise that tests how changes in key assumptions (pricing, volume, costs) would affect profit, cash flow, or DSCR. Useful for understanding risk.

Startup Costs

Total initial expenses required to open a business, including build-out, equipment, licenses, initial inventory, opening marketing, and working capital.

SWOT Analysis

An evaluation of internal Strengths and Weaknesses and external Opportunities and Threats. A standard strategic planning tool inside business plans.

T

Target Market

The specific customer segment a business aims to serve, defined by demographics, location, industry, or behavior.

Term Loan

A loan with a fixed amount, interest rate, and repayment schedule over a set term. SBA 7(a) and many bank loans are structured as term loans.

Top-Line Revenue

Total business income before any expenses are deducted. The “top line” on an income statement.

U

Underwriting

The lender’s process of evaluating risk, reviewing financials, checking credit, and validating assumptions before approving a loan.

Use of Funds

A breakdown of how borrowed or invested capital will be spent (real estate, equipment, build-out, inventory, working capital). SBA lenders require clear, categorized use-of-funds tables.

V

Valuation

An estimate of what a business is worth, based on methods such as discounted cash flow, multiples of EBITDA, or comparable sales.

Variable Costs

Costs that change depending on sales or production volume (materials, commissions, packaging, some hourly labor).

W

Working Capital

Funds available to cover daily operational needs, calculated as current assets minus current liabilities. Critical for startup ramp-up and SBA loan approval.

X

X-Factor

An element that gives your business a unique competitive edge—such as a proprietary process, niche focus, location advantage, or standout brand.

Y

Year-Over-Year (YOY)

A performance comparison of a metric (revenue, profit, expenses) from one year to the next. Used to assess growth and trends.

Z

Zero-Based Budgeting

A budgeting method where each period starts at zero and every expense must be justified, rather than basing budgets on prior-year spending.

Last updated: 2025