{"ok":true,"canonical_url":"https://dealroom.so/glossary/financial-leverage","api_url":"https://dealroom.so/api/public/glossary/financial-leverage","data_freshness":{"sba_records_through":"2026-05-31","fdic_records_through":"2026-03-31","dealroom_last_updated":"2026-06-15","timezone":"America/Chicago"},"source_summary":["Public SBA 7(a) loan records","FDIC institution data","DealRoom lender and franchise enrichment"],"term":{"slug":"financial-leverage","term":"Financial leverage","group":"Reading the business","definition":"This is the extent to which a business uses borrowed money (debt) to finance its assets and operations. It can amplify returns but also increases risk if the business can't service the debt.","what_it_means":"In an SBA 7(a) acquisition, you're inherently using financial leverage by taking on debt to buy the business. The goal is for the business's returns on the purchased assets to exceed the cost of the debt. Lenders will scrutinize your proposed leverage through metrics like the Debt-to-equity ratio and DSCR to ensure it's sustainable.","url":"https://dealroom.so/glossary/financial-leverage","official_sources":[{"slug":"sop-50-10","title":"SOP 50 10 — Lender and Development Company Loan Programs","official_url":"https://www.sba.gov/document/sop-50-10-lender-development-company-loan-programs","official_label":"View on SBA.gov","authority_tier":2,"publisher":"U.S. Small Business Administration","source_guide_url":"https://dealroom.so/sba-7a/sources/sop-50-10"}],"related":[{"slug":"debt-to-equity-ratio","term":"Debt-to-equity ratio","url":"https://dealroom.so/glossary/debt-to-equity-ratio"},{"slug":"overleverage","term":"Overleverage","url":"https://dealroom.so/glossary/overleverage"},{"slug":"dscr","term":"DSCR","url":"https://dealroom.so/glossary/dscr"},{"slug":"equity-injection","term":"Equity injection","url":"https://dealroom.so/glossary/equity-injection"}],"related_questions":[{"question":"What if my personal financial statement shows low liquid assets?","url":"https://dealroom.so/sba-loans/basics/what-if-my-personal-financial-statement-shows-low-liquid-assets"},{"question":"Are SBA 7(a) loans exclusively for businesses with financial difficulties?","url":"https://dealroom.so/sba-loans/basics/are-sba-7-a-loans-exclusively-for-businesses-with-financial-difficulties"},{"question":"What if my business is new and has no financial history?","url":"https://dealroom.so/sba-loans/basics/what-if-my-business-is-new-and-has-no-financial-history"},{"question":"Does misrepresenting financial information on the SBA application automatically kill approval?","url":"https://dealroom.so/sba-7a/questions/does-misrepresenting-financial-information-on-the-sba-application-automatically-kill-appro"},{"question":"How does my personal financial history affect SBA 7(a) loan approval?","url":"https://dealroom.so/sba-7a/questions/how-does-my-personal-financial-history-affect-sba-7-a-loan-approval"},{"question":"What specific financial documentation will I need to provide for my personal finances?","url":"https://dealroom.so/sba-7a/questions/what-specific-financial-documentation-will-i-need-to-provide-for-my-personal-finances"}]},"caveats":["Definitions represent DealRoom's plain-English interpretation for buyers; verify regulatory terms against the official SBA and eCFR sources listed.","Not legal, tax, or financial advice, and not an SBA eligibility determination."],"citation":{"label":"DealRoom.so Glossary — Financial leverage","url":"https://dealroom.so/glossary/financial-leverage","source_type":"DealRoom Data"}}