Glossary · Reading the business
Debt Service Coverage Projection
In short
This forecasts the business's ability to generate enough cash flow to cover its principal and interest payments on the new loan. It's a critical measure of your repayment capacity.
What it means in a deal
Lenders require a Debt Service Coverage Projection to ensure the business can comfortably make loan payments after your acquisition. This usually involves financial projections for the next 1-2 years. A strong projection, often showing a DSCR of 1.25x or higher, is essential for SBA approval.
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 Debt Service Coverage Projection
- Does the SBA require a specific debt service coverage ratio (DSCR) for approval?
- When is a debt service coverage ratio waiver or exception possible for an acquisition?
- How does a seller note on full standby affect the debt service coverage ratio calculation?
- What level of debt service coverage ratio (DSCR) does an SBA 7(a) lender typically look for?
- How does the SBA evaluate 'prudent lending standards' in 7(a) loan underwriting regarding debt service coverage?
- How does a seller note on partial standby affect an SBA 7(a) loan's debt service coverage ratio?
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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