Common Terms Used In Lending

These are expenses that are assigned to cash flow to normalize a profit and loss statement. Normal add-backs include interest, taxes, depreciation, amortization, one-time expenses, personal expenses, and owner’s benefits in excess of market such as compensation or rent.
Term used when a loan which does not fully amortize over its term. Since it is not fully amortized, a large single payment is required at the end of the term to repay the remaining principle balance of the loan. For example, for a loan with a 10-year amortization and a five-year term, the loan will balloon in five years, requiring the remaining five years of principle to be repaid at the end of the term.
The ratio of the cash available to service debt (NOI) and the total debt service for all interest, principle, and lease payments. (NOI/total debt service). For example, a DSCR of 1.5 indicates there is 50% more income than is required to repay all debt. Conversely, a DSCR of less than .90 would indicate there is only 90% of the income to repay all debt, thus negative cash flow.
Earnings Before Interest Taxes Depreciation Amortization

This is the period of time over which the loan payments are calculated. A loan’s payments may be calculated over a longer (such as 20 years) time, while the loan term may be shorter (such as five years).
Period of time over which the loan is to be repaid.
Net Operating Income is often called cash flow. This includes EBITDA + add-backs + owner’s compensation.
Net Operating Margin is a measurement of profitability (NOI/Net Operating Revenues). A typical NOM for a well-performing pharmacy will be 7-12%. This is dependent upon many variables, particularly the specialty of the pharmacy (such as retail, compounding, or long-term care, for example).