Senior Debt to EBITDA Ratio

by a searcher from University of Miami

1 week ago

Hi all,

I'm working with a regional lender who is telling me that the highest they and most banks will be comfortable with is a 3:1 Senior debt to EBITDA ratio. Example: if EBITDA last year was $1M, the highest amount of senior debt they will be able to offer is $3M. Is this an industry standard, or just something this banker is saying?

I'm asking because it is causing issues with deals where I'd like to offer higher than a 3x multiple and leave some working capital in the business plus roll in project costs.

Thank you for any insights!

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13 comments

searcher from Butler University

Evan, I know a lot of bankers in the Indy area. I was a commercial bank underwriter and loan officer for 10 years before acquiring my first company 9 years ago. Feel free to reach out at --@----.com if you want to connect. 3x leverage is a good estimate of sr leverage, but there are factors that can push that higher or lower such as collateral and how strong the debt service coverage is.

6 days ago | like reply | 0 likes

member from Middlebury College

Good question. Thanks for these responses!

1 week ago | like reply | 0 likes

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