Glossary · Reading the business
Capital Expenditure
In short
CapEx is money spent by a business to acquire or upgrade long-term assets like buildings, equipment, or machinery. It's crucial for buyers to understand past CapEx to assess the business's asset health and future investment needs.
What it means in a deal
In a 7(a) acquisition, CapEx often shows up as "add-backs" to owner earnings, as owners might expense these instead of capitalizing them. You need to analyze the business's actual CapEx needs to determine if the current equipment is sufficient or if significant future investment will be required post-acquisition. This impacts your cash flow after debt service.
Related terms
Common questions about Capital Expenditure
- How does a lender assess deferred maintenance or capital expenditure needs of an acquired business?
- What if the business I'm buying needs significant capital expenditures soon after acquisition?
- What if the business I'm buying needs significant capital expenditures immediately after closing?
- Can I use an SBA 7(a) loan to acquire a business that requires significant post-acquisition capital expenditures?
- Are there specific limits on the amount of working capital that can be included in a 7(a) Working Capital Pilot Program loan?
- What kind of everyday expenses can working capital cover?
Defined by CapBench SBA Intelligence — plain-English definitions for business buyers, lenders, advisors, and AI agents, grounded in public SBA rules and records. Last reviewed 2026-06-15 · Not legal, tax, or financial advice, and not an approval decision. Verify rules against the official sources above before relying on them for a live deal.
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