Glossary · Reading the business
Cash flow coverage
In short
This measures a business's ability to generate enough cash to cover its debt payments and other obligations. It's a critical indicator of financial health for lenders.
What it means in a deal
Lenders analyze cash flow coverage using metrics like DSCR (Debt Service Coverage Ratio) or Cash Flow After Debt Service. The SBA requires a minimum DSCR of 1.15:1 for most 7(a) loans. You need to demonstrate strong, consistent cash flow from the business to comfortably make your loan payments and operate.
Official sources
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 Cash flow coverage
- Can future cash flow or profits from the acquired business count as equity injection?
- How can an SBA 7(a) loan help with ongoing cash flow for my business?
- What is the primary factor a lender considers when evaluating the cash flow from an acquired business?
- Are there any restrictions on the use of cash flow projections for an SBA 7(a) acquisition loan?
- Can I use an SBA 7(a) loan for my business's daily operating expenses or cash flow?
- How does a lender evaluate the reasonableness of a borrower's projections for future revenue and cash flow?
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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