Minimum DSCR?

by a searcher from Ivey Business School at Western University

1 year ago

I know there's no one size fits all, but I'm wondering what people use as their minimum DSCR when evaluating deal structures? Banks in my area have a covenant at ~1.25 and obviously you need cushion on top of that. Any and all thoughts are much appreciated :)

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professional from University of Southern California - Marshall School of Business

Forget lender preferences, temporarily. One size definitely fits all. The higher the ratio, the better. Too risky to invest with 1.49 or lower. Why? Because there are so many wonderful opportunities (worthwhile businesses for sale) that won’t keep buyers up all night worrying about cash flow. Like the first month(s) new owners experience a seasonal or cyclical decline of net cash flow. (When debt and other payments are fixed amounts.) Something to think about?

1 month ago | like reply | 0 likes

lender from University of Utah

I think you should model at 1.25x but my bank only requires 1.15x. Happy to discuss further. --@----.com or###-###-####

2 months ago | like reply | 0 likes

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