Glossary · Reading the business
Discretionary expenses
In short
These are non-essential business costs that an owner chooses to incur, often for personal benefit, which can be eliminated or reduced without harming operations.
What it means in a deal
Identifying and "adding back" discretionary expenses is crucial for calculating a business's true owner benefit or Adjusted EBITDA. Your CPA will help you scrutinize expenses like excessive travel, personal vehicles, or non-business related salaries to adjust the profit for a buyer.
Related terms
Common questions about Discretionary expenses
- What kind of everyday expenses can working capital cover?
- Which pre-closing business expenses can count towards equity?
- Can working capital be used for unexpected business expenses after closing?
- Can I use SBA 7(a) loan funds for personal expenses?
- What types of expenses can an SBA 7(a) loan cover?
- What duration of post-acquisition operating expenses can working capital typically 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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