Glossary · Reading the business
Debt Service Requirements
In short
This refers to the total amount of principal and interest payments a business needs to make on its debts over a specific period. It's crucial for assessing a business's ability to repay a loan.
What it means in a deal
Before buying, you must project if the business's Adjusted Net Operating Income can cover the new loan's Debt Service Requirements. Lenders use the Debt Service Coverage Ratio (DSCR) to measure this. Insufficient cash flow to meet these requirements is a major red flag for lenders and a significant risk for you.
Related terms
Common questions about Debt Service Requirements
- 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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