{"ok":true,"canonical_url":"https://dealroom.so/glossary/discount-factor","api_url":"https://dealroom.so/api/public/glossary/discount-factor","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":"discount-factor","term":"Discount Factor","group":"Reading the business","definition":"A multiplier used in financial modeling to calculate the present value of future cash flows, reflecting the time value of money and the risk involved.","what_it_means":"When evaluating a business, a discount factor helps you understand what future earnings are worth today. It's a key component in discounted cash flow (DCF) valuations. A higher discount factor implies greater risk or a higher required rate of return, reducing the present value of those future earnings.","url":"https://dealroom.so/glossary/discount-factor","official_sources":[],"related":[{"slug":"business-valuation","term":"Business valuation","url":"https://dealroom.so/glossary/business-valuation"},{"slug":"cash-flow","term":"Cash flow","url":"https://dealroom.so/glossary/cash-flow"},{"slug":"financial-projections","term":"Financial projections","url":"https://dealroom.so/glossary/financial-projections"},{"slug":"multiple","term":"Multiple","url":"https://dealroom.so/glossary/multiple"}],"related_questions":[{"question":"What is the primary factor determining the interest rate on an SBA 7(a) loan?","url":"https://dealroom.so/sba-7a/questions/what-is-the-primary-factor-determining-the-interest-rate-on-an-sba-7-a-loan"},{"question":"What is the primary factor a lender considers when evaluating the cash flow from an acquired business?","url":"https://dealroom.so/sba-7a/questions/what-is-the-primary-factor-a-lender-considers-when-evaluating-the-cash-flow-from-an-acquir"},{"question":"What is the primary factor the SBA considers when evaluating a new business owner's management experience?","url":"https://dealroom.so/for-lenders/questions/what-is-the-primary-factor-the-sba-considers-when-evaluating-a-new-business-owner-s-manage"},{"question":"What is the primary factor the SBA considers when evaluating management experience for a new business acquisition?","url":"https://dealroom.so/for-lenders/questions/what-is-the-primary-factor-the-sba-considers-when-evaluating-management-experience-for-a-n"},{"question":"How does personal collateral, like my home, factor into a $700,000 SBA 7(a) acquisition loan?","url":"https://dealroom.so/sba-7a/questions/how-does-personal-collateral-like-my-home-factor-into-a-700-000-sba-7-a-acquisition-loan"},{"question":"What is the primary factor in determining SBA 7(a) loan eligibility for a business acquisition when the seller retains a minority equity stake?","url":"https://dealroom.so/for-lenders/questions/what-is-the-primary-factor-in-determining-sba-7-a-loan-eligibility-for-a-business-acquisit"}]},"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 — Discount Factor","url":"https://dealroom.so/glossary/discount-factor","source_type":"DealRoom Data"}}