Glossary · Reading the business
High Leverage
In short
High leverage means a business relies heavily on debt to finance its operations or assets. While common in acquisitions, excessive leverage can signal higher risk and strain cash flow, impacting your ability to repay the SBA loan.
What it means in a deal
Your SBA loan will introduce new debt, increasing the business's overall leverage. Lenders evaluate this through metrics like Debt Service Coverage Ratio (DSCR) and overall leverage. If the business already has significant debt relative to its cash flow, or your deal makes it too leveraged, the lender might require a larger equity injection or a seller note on standby to mitigate risk.
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 High Leverage
- Can an SBA 7(a) loan be used to refinance high-interest business debt?
- What if the business I'm acquiring is losing money but has high growth potential?
- Does having a high amount of personal student loan debt affect SBA 7(a) loan approval?
- What if my personal debt-to-income ratio is high, even with a good credit score?
- How does high customer concentration in a target business affect SBA 7(a) acquisition loan approval?
- What specific factors should a lender assess when underwriting a business with a high customer concentration?
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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