Glossary · Reading the business
Debt-to-equity ratio
In short
This financial ratio compares a company's total liabilities to its shareholder equity. It indicates how much debt a business uses to finance its assets relative to the value provided by owners.
What it means in a deal
Lenders use the debt-to-equity ratio to assess a business's financial leverage and risk. A high ratio might indicate overleverage, making it harder to get an SBA loan. For an acquisition, they'll calculate this ratio for the pro forma business, including the new SBA loan and your equity injection, to ensure it meets prudent lending standards.
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-to-equity ratio
- What is the debt-to-worth ratio requirement for a $0-down partner buyout?
- What if my personal debt-to-income ratio is high, even with a good credit score?
- What if I have a high debt-to-income ratio personally, even with a good credit score?
- 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?
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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