Glossary · Reading the business
Repayment capacity
In short
Repayment capacity is the ability of a business to generate enough cash flow to cover its debt payments. Lenders care because it directly shows if your acquired business can realistically pay back the SBA loan.
What it means in a deal
Lenders scrutinize the target business's historical financials and your projections, specifically focusing on cash flow after operating expenses but before debt service. You need strong SDE or EBITDA relative to the proposed loan payments to demonstrate this. If your deal's repayment capacity is weak, it won't get funded.
Official sources
13 CFR Part 120 — Business Loans
Office of the Federal Register · Federal regulation
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 Repayment capacity
- How does an SBA 7(a) loan typically handle seasonal businesses for repayment capacity?
- What is the typical repayment term for working capital only?
- Does the SBA set specific repayment schedules for 7(a) loans?
- What are the typical repayment terms for an SBA 7(a) loan?
- What are the typical repayment periods for an SBA 7(a) loan?
- What is the typical repayment period for an SBA 7(a) loan?
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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