Glossary · Reading the business
Disposable income
In short
This is the income left over after paying all essential expenses and taxes. For a small business owner relying on the business for salary, it's about how much the business can actually pay you.
What it means in a deal
Lenders often look at the owner's personal disposable income, or lack thereof, when evaluating a borrower's ability to withstand minor business fluctuations. If your personal finances are tight, it signals higher risk. Ensure your personal financial statement (PFS) reflects a healthy cushion, or explain how the business's cash flow after debt service will cover your needs.
Related terms
Common questions about Disposable income
- What if the acquired business primarily generates revenue from passive rental income?
- What constitutes "passive income" disqualifying a business from 7(a) loan eligibility?
- What if my personal tax returns show inconsistent income or losses from other ventures?
- Do businesses that primarily generate passive income qualify for an SBA 7(a) loan?
- Is there an income limit for my business to be "small" by SBA rules?
- What if the business I'm buying has existing deferred revenue or unearned income?
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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