Glossary · Reading the business
Leverage ratio
In short
This financial metric measures how much a business relies on debt to finance its assets. A high ratio indicates higher financial risk.
What it means in a deal
Lenders use leverage ratios to assess the financial health of the business you're acquiring and its ability to take on new debt. A common ratio is Total Debt to EBITDA. A high ratio might concern a lender, indicating the business could struggle with repayment, so understand the target business's current and projected leverage.
Related terms
Common questions about Leverage ratio
- Does the SBA require a specific debt service coverage ratio (DSCR) for approval?
- What is the debt-to-worth ratio requirement for a $0-down partner buyout?
- 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 if my personal debt-to-income ratio is high, even with a good credit score?
- What level of debt service coverage ratio (DSCR) does an SBA 7(a) lender typically look for?
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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