Glossary · Reading the business
In short
This occurs when a business takes on too much debt relative to its cash flow or assets, making it difficult to meet repayment obligations. For a buyer, it can lead to financial distress and even bankruptcy.
An SBA loan can be a powerful tool, but avoid over-leveraging the acquired business. Lenders assess your Debt Service Coverage Ratio (DSCR) to prevent this, ensuring sufficient cash flow after debt service. Be conservative in your projections to leave room for unexpected downturns.
SOP 50 10 — Lender and Development Company Loan Programs
U.S. Small Business Administration · SBA Standard Operating Procedure
Last checked 2026-06-15. Official sources control — verify before relying on any rule for a live deal.
Defined by DealRoom.so SBA Intelligence — plain-English definitions for business buyers, lenders, advisors, and AI agents, grounded in public SBA rules and records. Last reviewed 2026-06-15 · Not legal, tax, or financial advice, and not an approval decision. Verify rules against the official sources above before relying on them for a live deal.
Pressure-test the numbers before you make an offer
Send us the asking price and the seller's cash flow — we'll show whether the deal services SBA debt and where the add-backs are likely to hold up.
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