{"ok":true,"canonical_url":"https://dealroom.so/glossary/cost-of-capital","api_url":"https://dealroom.so/api/public/glossary/cost-of-capital","data_freshness":{"sba_records_through":"2026-05-31","fdic_records_through":"2026-03-31","dealroom_last_updated":"2026-06-15","timezone":"America/Chicago"},"source_summary":["Public SBA 7(a) loan records","FDIC institution data","DealRoom lender and franchise enrichment"],"term":{"slug":"cost-of-capital","term":"Cost of capital","group":"Reading the business","definition":"This is the total cost a business pays to finance its operations, including interest on debt and returns to equity investors. For a buyer, it impacts the overall profitability and financial structure of the acquisition.","what_it_means":"When you acquire a business with an SBA loan, the interest rate and fees are a key component of your debt's cost of capital. Combine this with the return you expect on your equity injection to understand the full financing cost. High cost of capital can strain cash flow and reduce your effective return.","url":"https://dealroom.so/glossary/cost-of-capital","official_sources":[],"related":[{"slug":"interest-only-payment","term":"Interest-Only Payment","url":"https://dealroom.so/glossary/interest-only-payment"},{"slug":"equity-injection","term":"Equity injection","url":"https://dealroom.so/glossary/equity-injection"},{"slug":"variable-rate","term":"Variable rate","url":"https://dealroom.so/glossary/variable-rate"},{"slug":"7a-loan","term":"7(a) loan","url":"https://dealroom.so/glossary/7a-loan"}],"related_questions":[{"question":"What factors primarily influence the premium cost of business life insurance?","url":"https://dealroom.so/sba-7a/questions/what-factors-primarily-influence-the-premium-cost-of-business-life-insurance"},{"question":"Can an SBA 7(a) loan cover the cost of inventory for a business?","url":"https://dealroom.so/sba-loans/basics/can-an-sba-7-a-loan-cover-the-cost-of-inventory-for-a-business"},{"question":"Can an SBA 7(a) loan cover the cost of a business valuation or appraisal?","url":"https://dealroom.so/sba-7a/questions/can-an-sba-7-a-loan-cover-the-cost-of-a-business-valuation-or-appraisal"},{"question":"What percentage of the project cost does the SBA typically expect as a down payment?","url":"https://dealroom.so/sba-loans/basics/what-percentage-of-the-project-cost-does-the-sba-typically-expect-as-a-down-payment"},{"question":"Can an SBA 7(a) loan cover the cost of a franchise transfer fee in an acquisition?","url":"https://dealroom.so/sba-7a/questions/can-an-sba-7-a-loan-cover-the-cost-of-a-franchise-transfer-fee-in-an-acquisition"},{"question":"Can an SBA 7(a) loan finance the cost of purchasing a commercial vehicle fleet as part of a business acquisition?","url":"https://dealroom.so/sba-7a/questions/can-an-sba-7-a-loan-finance-the-cost-of-purchasing-a-commercial-vehicle-fleet-as-part-of-a"}]},"caveats":["Definitions represent DealRoom's plain-English interpretation for buyers; verify regulatory terms against the official SBA and eCFR sources listed.","Not legal, tax, or financial advice, and not an SBA eligibility determination."],"citation":{"label":"DealRoom.so Glossary — Cost of capital","url":"https://dealroom.so/glossary/cost-of-capital","source_type":"DealRoom Data"}}