Glossary · The loan itself
Loan-to-cost ratio(LTC ratio)
In short
This ratio compares the loan amount to the total project costs. It tells you what percentage of the deal is financed by the loan versus your equity.
What it means in a deal
Lenders use the loan-to-cost ratio to assess risk. The SBA has specific maximum ratios for different types of transactions, dictating how much equity you must inject. A higher ratio means more leverage and potentially higher risk for the lender. Understand the required equity injection based on this ratio.
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 Loan-to-cost 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?
- How does a lender request an increase to an authorized 7(a) loan amount due to unforeseen project cost increases?
- Can an SBA 7(a) loan cover the cost of relocating the acquired business to a new facility?
- Does the SBA require a specific debt service coverage ratio (DSCR) for approval?
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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