Is anyone using the Debt Service Coverage Ratio (DSCR) to set the price?

October 29, 2025

by a professional from University of Southern California - Marshall School of Business in North Palm Beach, FL, USA

Instead of haggling over asking prices, why shouldn't brokers, sellers, and buyers begin with a single question: What can the business truly afford to borrow? Any ideas on how to do it? Any experiences where brokers or sellers won't listen to the rationale? Pros? Cons?

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Reply by a lender
from Cornell University in Los Angeles, CA, USA

Hi ^redacted‌ - nice to meet you. This is a great question and one I constantly think about. We use a DSCR analysis all the time when buyers plan to finance through the SBA. It shows what the business can actually afford to borrow, meet lender requirements, and that often becomes the real price ceiling. The problem is, sellers usually price based on what they think the business is worth, not what it can truly support. During the LOI stage (which is not binding), we use DSCR to bring that back to reality - it’s not about lowballing, it’s about making sure the deal can actually get funded. We have a lot experience financing various companies via the SBA. If you ever need help talking through a deal, I am happy to help. We work with all the major SBA lenders. The bank pays us after your loan closes, so this is a 100% free service for you. You can email me directly at redacted or schedule a meeting with me: https://cal.com/francodeguzman/30min. Look forward to chatting!

Reply by a searcher
from Harvard University in Highland, UT, USA

My philosophy on acquisition pricing is pretty simple: it's best to triangulate a reasonable value range by pulling together a few different financial metrics. Why? Because leaning on just one number can lead to an outlier offer. Using multiple inputs lets us quickly nail down a value range we can really stand by. For the latest Letter of Intent (LOI) I worked on, I focused on three key benchmarks: EBITDA/SDE Multiple: This is the core starting point, giving us a baseline for profitability based on standard industry deals. Revenue Multiple: I layered this in (for example: targeting 0.8x to 1x for top companies in the XYZ space) to judge market position, scale, and momentum. Debt Service Coverage Ratio (DSCR): This is critical, non-negotiable constraint, since it reflects what I can realistically get financed. The beauty of this multi-metric approach isn't just a strong initial offer. It also gives us a clear roadmap for when things change. If due diligence—say, a Quality of Earnings report—shows a different EBITDA, having shared the original points of reference helps me quickly and logically reset the new price range.

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