{"ok":true,"canonical_url":"https://dealroom.so/glossary/overleverage","api_url":"https://dealroom.so/api/public/glossary/overleverage","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":"overleverage","term":"Overleverage","group":"Reading the business","definition":"This occurs when a business takes on too much debt relative to its cash flow or equity, making it difficult to meet debt obligations and increasing its risk of financial distress. As a buyer, you want to avoid this.","what_it_means":"A business is overleveraged if its debt service requirements exceed its ability to generate sufficient cash flow, especially after a new acquisition loan. Lenders assess this through metrics like DSCR and Debt-to-equity ratio. Taking on too much debt can cripple your ability to operate, grow, or absorb unexpected downturns. Ensure the deal structure allows for adequate cash flow after debt service.","url":"https://dealroom.so/glossary/overleverage","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":"dscr","term":"DSCR","url":"https://dealroom.so/glossary/dscr"},{"slug":"cash-flow-after-debt-service","term":"Cash flow after debt service","url":"https://dealroom.so/glossary/cash-flow-after-debt-service"},{"slug":"financial-leverage","term":"Financial leverage","url":"https://dealroom.so/glossary/financial-leverage"}],"related_questions":[]},"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 — Overleverage","url":"https://dealroom.so/glossary/overleverage","source_type":"DealRoom Data"}}