# What debt service coverage does an SBA acquisition need?

**Short answer:** 1.25:1 for an Initial Acquisition, Owner Buyout, or employee stock ownership plan (ESOP) and Cooperative deal, and 1.15:1 for a Business Expansion. Global cash flow must also reach 1:1. Source: SOP 50 10 8.1, App. 15, Para. C.2.b.

Canonical page: https://www.sbaexpress.loans/answers/sba-debt-service-coverage-business-purchase/
Last checked: 2026-11-08

Most acquisitions need 1.25:1. SOP 50 10 8.1, Appendix 15, Para. C.2.b, sets coverage by deal type:

- Initial Acquisition: 1.25:1
- Business Expansion: 1.15:1
- Owner Buyout: 1.25:1
- ESOP and Cooperative: 1.25:1

## How it is measured

Coverage must be met on the last fiscal year-end, or on an average of the last two, on a historical or adjusted basis. Historical coverage is earnings before interest, taxes, depreciation and amortization (EBITDA) divided by combined debt service after the deal. The lender may add back rent when owner-occupied commercial real estate is part of the sale.

A global cash flow analysis must also meet 1:1.

## Projections do not qualify the loan

The lender must evaluate your post-closing projections but cannot rely on them to meet the ratio. The exception is an owner-occupied Special Purpose Property.

## If the numbers fall short

You can add unlimited or limited equity to shrink the loan and its payment until coverage works.

## SBA Express and 7(a) Small

No reduced ratio applies because a loan is small or Express (Section B, Ch. 2, Para. A.2). The 1.10:1 ratio for 7(a) Small loans excludes changes of ownership.

## Sources

- [SOP 50 10 8.1, App. 15, Para. C.2.b (about pp. 377-380)](https://legacy.sba.gov/sites/default/files/2026-10/SOP%2050%2010%208.1%20Technical%20Policy%20Updates%20effective%20%2010.1.2026.docx)
- [SOP 50 10 8.1, Sec. B, Ch. 2, Para. A.2 (p. 125)](https://legacy.sba.gov/sites/default/files/2026-10/SOP%2050%2010%208.1%20Technical%20Policy%20Updates%20effective%20%2010.1.2026.docx)
- [SOP 50 10 8.1, Sec. B, Ch. 2, Para. C.2 (about p. 129)](https://legacy.sba.gov/sites/default/files/2026-10/SOP%2050%2010%208.1%20Technical%20Policy%20Updates%20effective%20%2010.1.2026.docx)