The coverage ratio is the first number a bank looks at: how many times the business's yearly profit covers the yearly loan payments. From October 1, 2026 a first-time buyer needs 1.25x, measured on the seller's actual numbers. Put a deal in and see whether it clears.
Start with the cash you can put in. Under the SBA rules in force from October 1, 2026, the bank needs at least 10% of the price from you. A seller note on full standby can cover up to half of that.
These are planning numbers. On the call we look at your real situation and tell you honestly whether this is your next move.
Book a free 15-minute callPlanning tool, not a loan offer. Rules reflect SBA SOP 50 10 8.1 for a first-time acquisition (10% buyer cash, standby seller note up to half, 1.25x coverage on historical profit, $5M maximum loan, 10-year amortization). Every lender adds its own requirements, closing costs and working capital change the numbers, and no financing is promised or arranged by us.
Banks check one number first: does the business's profit cover the loan payments with room to spare? From October 1, 2026 the bar for a first-time buyer is 1.25x, measured on the seller's actual numbers, not projections.
Have a real deal in front of you? Bring it to the call and we will take it apart with you.
Book a free 15-minute callPlanning tool, not a loan offer. Rules reflect SBA SOP 50 10 8.1 for a first-time acquisition (10% buyer cash, standby seller note up to half, 1.25x coverage on historical profit, $5M maximum loan, 10-year amortization). Every lender adds its own requirements, closing costs and working capital change the numbers, and no financing is promised or arranged by us.
DSCR is yearly profit divided by yearly loan payments. Take the business's cash flow from the last tax year, subtract a market salary for you as the owner, and divide by everything the business will have to pay lenders each year: the bank loan and any seller note with payments. If the answer is 1.25 or higher, the deal clears the bar. If not, the price has to come down, the profit has to be real and higher, or more of the price has to come from you or from a seller note on standby.
| DSCR | What the bank sees |
|---|---|
| Below 1.00x | The business cannot make the payments. No lender will touch it. |
| 1.00x to 1.14x | Barely covers. Any bad month is a missed payment. Declined for a business purchase. |
| 1.15x to 1.24x | The old minimum. From October 1, 2026 it no longer clears for a first-time acquisition. |
| 1.25x to 1.49x | Clears the bar. Expect the lender to stress-test the add-backs and your salary assumption. |
| 1.50x and above | Comfortable. Room for a slow year and for growth spending. |
Under the previous rules a lender could count projected cash flow and clear a deal at 1.15x. Under SOP 50 10 8.1, a first-time acquisition must show 1.25x on the seller's historical numbers: the last fiscal year or a two-year average. Projections can be reviewed but cannot be used to pass the test. In plain terms: the business has to already earn the money, and add-backs have to hold up.
