Glossary
Debt service coverage ratio
Adjusted cash flow divided by total debt service - the first number an underwriter calculates.
Most SBA and bank lenders want at least 1.25×, meaning the business generates 25% more cash than it needs to cover all debt payments.
Add-backs typically include depreciation, amortisation, existing interest, and documented discretionary owner expenses. A market salary for the operator is then subtracted.
See also
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