Glossary · Reading the business
Operational Expense
In short
These are the ongoing costs of running a business, such as rent, salaries, and utilities. Buyers must scrutinize operational expenses to accurately project future profitability and cash flow.
What it means in a deal
During due diligence, meticulously review the seller's Profit and Loss Statements to identify all operational expenses. Pay close attention to any "add-backs" proposed by the seller, ensuring they are truly non-recurring or discretionary and won't be part of your ongoing costs.
Related terms
Common questions about Operational Expense
- How does business overhead expense insurance differ from key-person life insurance?
- Is working capital from an SBA loan available immediately at closing for operational expenses and payroll?
- Are day-to-day operational expenses like rent or utilities an allowed use of SBA 7(a) loan funds?
- Can an SBA 7(a) loan include funds for operational expenses like payroll and utilities for the first few months after acquisition?
- Can I use the working capital portion of my SBA 7(a) loan to cover unexpected operational expenses during the first six months?
- What if the franchisor requires specific operational changes that impact the business's profitability?
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.
Pressure-test the numbers before you make an offer
Send us the asking price and the seller's cash flow — we'll show whether the deal services SBA debt and where the add-backs are likely to hold up.
Free · No documents · Usually same-day
Backed by data on 1,000+ SBA lenders and 300,000+ funded deals. Your details go only to lending partners you ask to be matched with — never sold to advertisers.