{"ok":true,"canonical_url":"https://dealroom.so/glossary/negative-debt-service-coverage","api_url":"https://dealroom.so/api/public/glossary/negative-debt-service-coverage","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":"negative-debt-service-coverage","term":"Negative Debt Service Coverage","group":"Reading the business","definition":"When a business's cash flow is insufficient to cover its debt payments. This is a critical red flag for lenders and indicates a high risk of default.","what_it_means":"If your pro forma cash flow analysis shows negative debt service coverage (DSCR below 1.0), it means the business isn't projected to generate enough cash to pay its loan obligations. This is a deal-killer for lenders, as it signals a high probability of default. You'll need to adjust your projections or deal structure to achieve a healthy DSCR before a loan can be approved.","url":"https://dealroom.so/glossary/negative-debt-service-coverage","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-service","term":"Debt service","url":"https://dealroom.so/glossary/debt-service"},{"slug":"dscr","term":"DSCR","url":"https://dealroom.so/glossary/dscr"},{"slug":"cash-flow","term":"Cash flow","url":"https://dealroom.so/glossary/cash-flow"},{"slug":"repayment-capacity","term":"Repayment capacity","url":"https://dealroom.so/glossary/repayment-capacity"}],"related_questions":[{"question":"Does the SBA require a specific debt service coverage ratio (DSCR) for approval?","url":"https://dealroom.so/sba-7a/questions/does-the-sba-require-a-specific-debt-service-coverage-ratio-dscr-for-approval"},{"question":"When is a debt service coverage ratio waiver or exception possible for an acquisition?","url":"https://dealroom.so/for-lenders/questions/when-is-a-debt-service-coverage-ratio-waiver-or-exception-possible-for-an-acquisition"},{"question":"How does a seller note on full standby affect the debt service coverage ratio calculation?","url":"https://dealroom.so/sba-7a/questions/how-does-a-seller-note-on-full-standby-affect-the-debt-service-coverage-ratio-calculation"},{"question":"What level of debt service coverage ratio (DSCR) does an SBA 7(a) lender typically look for?","url":"https://dealroom.so/sba-7a/questions/what-level-of-debt-service-coverage-ratio-dscr-does-an-sba-7-a-lender-typically-look-for"},{"question":"How does the SBA evaluate 'prudent lending standards' in 7(a) loan underwriting regarding debt service coverage?","url":"https://dealroom.so/for-lenders/questions/how-does-the-sba-evaluate-prudent-lending-standards-in-7-a-loan-underwriting-regarding-deb"},{"question":"How does a seller note on partial standby affect an SBA 7(a) loan's debt service coverage ratio?","url":"https://dealroom.so/for-lenders/questions/how-does-a-seller-note-on-partial-standby-affect-an-sba-7-a-loan-s-debt-service-coverage-r"}]},"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 — Negative Debt Service Coverage","url":"https://dealroom.so/glossary/negative-debt-service-coverage","source_type":"DealRoom Data"}}