Glossary · Reading the business
Factor
In short
In business valuation, a factor is a multiplier applied to a company's earnings or revenue to estimate its market value. Different industries and business types have varying factors.
What it means in a deal
You'll often hear business brokers or sellers use a 'multiple' or 'factor' of EBITDA or SDE to justify a purchase price. Understand that this is a starting point, not a definitive valuation. Your lender's appraisal will use more robust methods to determine fair market value, often starting with a factor but adjusting for specific business risks and opportunities.
Related terms
Common questions about Factor
- What is the primary factor determining the interest rate on an SBA 7(a) loan?
- What is the primary factor a lender considers when evaluating the cash flow from an acquired business?
- What is the primary factor the SBA considers when evaluating a new business owner's management experience?
- What is the primary factor the SBA considers when evaluating management experience for a new business acquisition?
- How does personal collateral, like my home, factor into a $700,000 SBA 7(a) acquisition loan?
- What is the primary factor in determining SBA 7(a) loan eligibility for a business acquisition when the seller retains a minority equity stake?
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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