Conventional financing covenants

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by a searcher from Dartmouth College - Tuck School of Business at Dartmouth
in Boston, MA, USA

11mos ago

Conventional financing covenants

Hi! Does anyone has experience with conventional financing for funding instead of SBA loans? I want to understand what kind of covenants and ratios are usually applied. For example, many years ago I remember a company I worked for, had to comply with a Debt/EBITDA ratio of 3.5x every quarter. That is what I am looking for.

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reply by a lender 11mos ago
from Emory University in Atlanta, GA, USA

^redacted‌, thanks for the mention. Carlos, we typically focus on debt/EBITDA and fixed charge coverage ratio (FCCR) as our main covenant tests. The debt/EBITDA is typically at a max of 3.25x, but we strongly prefer under 3.0x and declining over time due to amortization and EBITDA growth. FCCR is almost always a minimum of 1.25x. However, everything is deal specific.

reply by a searcher 11mos ago
from State University of New York Empire State College in Jamestown, NY, USA

In a recent conversation with a local bank they wanted to see a debt service coverage ratio of 1.25 and since I didnt have specific industry experience they upped it toredactedInterest rate on assets was going to be around 7.75% for a max of 7 years. They'd fund up to 70% of the value of the assets, but only hard assets, no goodwill.