DSCR - What's Your Target?

In my decades-long career I've never seen a buyer experienced with business management lose their company or investment when the ratio was 2.0. I've seen quite a few lose it all with lower ratios.
I owned a business loan company for quite a while, meeting lots of purchasers who either bought the right business the wrong way or the wrong business. Financing is the tail that wags the dog, quite frequently. A big surprise to some buyers.. 🥺

Higher is always better. The technical minimum for SBA loan is 1.15x, but most lenders prefer to be at a minimum of 1.25x or higher in the last two fiscal years, but there is always some flexibility if you have a quickly growing business. You can also get away with hitting it on some trailing 12-month periods. I have many customers that target 1.50x when making offers just because they know not all of the add-backs might come true and they want room for any drop in revenues or cash flow in the future. However, depending on how competitive the situation is, many deals get done close to the 1.25x DSCR. Happy to discuss in more detail at any time at --@----.com Good luck with your search.