Glossary · Reading the business
Capacity
In short
One of the "5 Cs of Credit," referring to the borrower's ability to repay the loan from the business's cash flow. It's the most critical factor for an SBA lender.
What it means in a deal
The lender primarily evaluates the business's historical and projected cash flow to determine if it can cover all operating expenses and debt service. They look at your Debt Service Coverage Ratio (DSCR) and global cash flow, including personal income. If the business can't generate enough cash, the deal won't get funded.
Official sources
13 CFR Part 120 — Business Loans
Office of the Federal Register · Federal regulation
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.
Related terms
Common questions about Capacity
Defined by CapBench 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.
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