Financing math
Does this ecommerce deal cover its debt? Compute Debt Service Coverage Ratio from TTM NOI, purchase price, down payment, and SBA 7(a) terms. Free. No signup.
Debt Service Coverage Ratio
1.37×
Meets the SBA floor of 1.25. Lenders will fund it, but there is little margin for operator error.
SBA 7(a) lenders typically require DSCR ≥ 1.25. Deals below that floor get restructured, not denied — add down payment, extend the term, or trim the price.
This calculator is for estimation. Your SBA lender will recompute DSCR against verified TTM financials, a new-owner salary, and any working-capital loan components before funding. Use this to gut-check deal structure before spending diligence dollars.
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Debt Service Coverage Ratio = Net Operating Income ÷ Annual Debt Service. A DSCR of 1.25 means the business throws off $1.25 of cash flow for every $1 of loan payments. Lenders use it as the single most important underwriting metric on acquisition loans.
SBA 7(a) lenders typically require DSCR ≥ 1.25 on a post-acquisition pro forma. Some will stretch to 1.15 with strong collateral and buyer experience; others won't fund below 1.35 on an ecommerce deal. Every lender has a credit memo minimum — ask before you send an LOI.
Use NOI — seller's SDE minus a market salary for the new owner-operator. That's the cash the business generates independent of the buyer's compensation, and it's the figure the lender's credit memo will compare against annual debt service.
Three levers: (1) increase the down payment to shrink the loan, (2) extend the term from 7 to 10 years to drop the monthly payment, (3) renegotiate the price — a seller note that defers payments past year 1 also works. Every 0.1 of DSCR is usually a ~$50k price concession on a $1M deal.
This is a simple amortized-payment calculation, which is how SBA 7(a) acquisition loans are structured. If you're modeling a seller note with interest-only years followed by a balloon, use the Loan Calculator for detailed cash flow modeling.