Glossary · Reading the business
Owner's draw
In short
Funds taken out of a business by its owner, often from a sole proprietorship or partnership, not typically reported as a salary. Buyers care because this represents discretionary owner compensation that can be adjusted to improve cash flow.
What it means in a deal
For valuation purposes, owner's draws are typically added back to derive SDE or EBITDA, as they are part of the owner's discretionary earnings. You need to understand how much the current owner is taking out and how that impacts the business's reported profit. Your personal compensation will replace this post-acquisition.
Related terms
Common questions about Owner's draw
- How does a lender confirm an owner's U.S. citizenship if they were born in a U.S. territory or abroad to U.S. parents?
- How does the SBA verify a non-owner investor's funds used for equity injection?
- Can a business owner's personal assets be used as collateral if business assets are limited?
- What specific documentation is required to verify a non-citizen owner's lawful permanent resident status?
- How does the SBA handle a partner buyout where the remaining owner's experience is limited?
- What specific documentation is required for a lender to verify U.S. citizenship if an owner was born in a U.S. territory or abroad to U.S. parents?
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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