{"ok":true,"canonical_url":"https://dealroom.so/glossary/disallowed-expense","api_url":"https://dealroom.so/api/public/glossary/disallowed-expense","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":"disallowed-expense","term":"Disallowed expense","group":"Reading the business","definition":"An expense not allowed for tax deduction or, in valuation, one a buyer wouldn't incur. It's an \"add-back\" to show true profitability.","what_it_means":"In an acquisition, a disallowed expense typically refers to an \"add-back\" that your accountant identifies during due diligence. These are non-recurring or discretionary expenses of the seller (e.g., excessive owner salary, personal travel) that a new owner wouldn't have. Adjusting for these gives you a more accurate picture of the business's true profitability (SDE/EBITDA).","url":"https://dealroom.so/glossary/disallowed-expense","official_sources":[],"related":[{"slug":"add-backs","term":"Add-backs","url":"https://dealroom.so/glossary/add-backs"},{"slug":"sde","term":"SDE","url":"https://dealroom.so/glossary/sde"},{"slug":"ebitda","term":"EBITDA","url":"https://dealroom.so/glossary/ebitda"},{"slug":"due-diligence","term":"Due diligence","url":"https://dealroom.so/glossary/due-diligence"}],"related_questions":[{"question":"How does business overhead expense insurance differ from key-person life insurance?","url":"https://dealroom.so/sba-7a/questions/how-does-business-overhead-expense-insurance-differ-from-key-person-life-insurance"},{"question":"What kind of everyday expenses can working capital cover?","url":"https://dealroom.so/sba-loans/basics/what-kind-of-everyday-expenses-can-working-capital-cover"},{"question":"Which pre-closing business expenses can count towards equity?","url":"https://dealroom.so/sba-7a/questions/which-pre-closing-business-expenses-can-count-towards-equity"},{"question":"Can working capital be used for unexpected business expenses after closing?","url":"https://dealroom.so/sba-7a/questions/can-working-capital-be-used-for-unexpected-business-expenses-after-closing"},{"question":"Can I use SBA 7(a) loan funds for personal expenses?","url":"https://dealroom.so/sba-loans/basics/can-i-use-sba-7-a-loan-funds-for-personal-expenses"},{"question":"What types of expenses can an SBA 7(a) loan cover?","url":"https://dealroom.so/sba-loans/basics/what-types-of-expenses-can-an-sba-7-a-loan-cover"}]},"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 — Disallowed expense","url":"https://dealroom.so/glossary/disallowed-expense","source_type":"DealRoom Data"}}