Glossary · Reading the business
Prepaid Expense
In short
Payments made by the business for goods or services it will receive in the future, like insurance premiums or rent paid in advance. These are assets on the balance sheet.
What it means in a deal
You'll see prepaid expenses on the Balance Sheet. During due diligence, verify these assets are legitimate and transferable to you post-acquisition. For instance, ensure any prepaid rent will benefit your lease agreement.
Related terms
Common questions about Prepaid Expense
- Can I use prepaid expenses, like insurance premiums, as part of my equity injection?
- Are prepaid rent or insurance expenses paid before closing considered part of the equity injection?
- How does business overhead expense insurance differ from key-person life insurance?
- Can a prepaid rent amount for the acquired business count towards my equity injection?
- What kind of everyday expenses can working capital cover?
- Which pre-closing business expenses can count towards equity?
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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