How much leverage is too much in your first acquisition?

This is one of the most common questions first-time buyers face. The ceiling for leverage is determined more by DSCR than by valuation multiples. Most lenders expect 1.25x to 1.50x DSCR, and in practice we aim for 1.5x or above to reflect durability and flexibility. Multiples still matter. A SaaS business at 7x EBITDA typically requires higher equity relative to debt, while a 4.5x HVAC business or a 3x roofing contractor may support a higher debt to equity ratio, provided earnings are stable and the purchase price is not inflated. The other piece many buyers underestimate is liquidity. Transactions fail less because of valuation and more because too little working capital is reserved. A 5 to 10 percent buffer beyond the peg can make the difference between a smooth first year and a distressed recap. What DSCR levels or working capital buffers have you found work best in your own deals? (Full breakdown in this month's AWG Brief - link in comments.)