Glossary · Reading the business
Cash flow test
In short
This is an analysis performed by lenders to determine if a business generates enough cash to cover all its operating expenses and debt payments. As a buyer, you care because it's how the lender decides if the business can afford the new SBA loan.
What it means in a deal
Lenders perform a cash flow test, often calculating the Debt Service Coverage Ratio (DSCR), based on the business's historical and projected financial performance. They'll use adjusted earnings (SDE or EBITDA) to ensure there's enough cash flow after accounting for all expenses and the new debt service, including the SBA loan and any seller notes.
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 test
- If I am buying out a partner, does the SBA require the business to pass a cash flow test post-acquisition?
- 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?
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.
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.
Free · No documents · Usually same-day
Backed by data on 1,000+ SBA lenders and 300,000+ funded deals. Your details go only to lending partners you ask to be matched with — never sold to advertisers.