{"ok":true,"canonical_url":"https://dealroom.so/glossary/high-leverage","api_url":"https://dealroom.so/api/public/glossary/high-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":"high-leverage","term":"High Leverage","group":"Reading the business","definition":"High leverage means a business relies heavily on debt to finance its operations or assets. While common in acquisitions, excessive leverage can signal higher risk and strain cash flow, impacting your ability to repay the SBA loan.","what_it_means":"Your SBA loan will introduce new debt, increasing the business's overall leverage. Lenders evaluate this through metrics like Debt Service Coverage Ratio (DSCR) and overall leverage. If the business already has significant debt relative to its cash flow, or your deal makes it too leveraged, the lender might require a larger equity injection or a seller note on standby to mitigate risk.","url":"https://dealroom.so/glossary/high-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":"overall-leverage","term":"Overall Leverage","url":"https://dealroom.so/glossary/overall-leverage"},{"slug":"debt-service","term":"Debt service","url":"https://dealroom.so/glossary/debt-service"},{"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":"Can an SBA 7(a) loan be used to refinance high-interest business debt?","url":"https://dealroom.so/sba-loans/basics/can-an-sba-7-a-loan-be-used-to-refinance-high-interest-business-debt"},{"question":"What if the business I'm acquiring is losing money but has high growth potential?","url":"https://dealroom.so/sba-7a/questions/what-if-the-business-i-m-acquiring-is-losing-money-but-has-high-growth-potential"},{"question":"Does having a high amount of personal student loan debt affect SBA 7(a) loan approval?","url":"https://dealroom.so/sba-7a/questions/does-having-a-high-amount-of-personal-student-loan-debt-affect-sba-7-a-loan-approval"},{"question":"What if my personal debt-to-income ratio is high, even with a good credit score?","url":"https://dealroom.so/sba-7a/questions/what-if-my-personal-debt-to-income-ratio-is-high-even-with-a-good-credit-score"},{"question":"How does high customer concentration in a target business affect SBA 7(a) acquisition loan approval?","url":"https://dealroom.so/sba-7a/questions/how-does-high-customer-concentration-in-a-target-business-affect-sba-7-a-acquisition-loan-"},{"question":"What specific factors should a lender assess when underwriting a business with a high customer concentration?","url":"https://dealroom.so/for-lenders/questions/what-specific-factors-should-a-lender-assess-when-underwriting-a-business-with-a-high-cust"}]},"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 — High Leverage","url":"https://dealroom.so/glossary/high-leverage","source_type":"DealRoom Data"}}