SBA 7a Loan Info
View Businesses for Sale that have Bank Financing (SBA Backed) in place for Qualified Buyers.
What is Debt Service Coverage Ratio / DSCR and why does it matter?
When a acquiring an Owner Operated Business, the Debt Service Coverage Ratio (DSCR) is a critical financial metric used by SBA Backed lenders to determine if a business generates enough income to cover the debt service, plus a market wage Managers Salary (must be enough to pay buyers living expenses / Household expenses) Plus a buffer of 25% to 50%.
Example Graphic Below
Business Price $500,000 Discretionary Earnings $170,000 Annual Debt Service $60,000 + New Owners Living Wage $70,000 = $130,000
Divide SDE $170,000 by $130,000 (Debt Service and Buyers Wage) = 1.30 DSCR
Another way to look at this is
SDE $170,000 - Buyers Wage $70,000 = $100,000
then Divide $100,000 by 20% = $500,000 is the Most a Buyer that needs $70,000 to live on and $60,000 for Debt Service can pay for this business.
