SBA DSCR Leeway?

February 17, 2025

by a searcher from Pomona College in South Kingstown, RI, USA

Hypothetical company:

2022 $298,000 SDE 2023 $307,000 SDE 2024 $190,000 SDE

However, in the first quarter of 2025, they will do $200k SDE. It appears 2024 was more of a timing issue than a down year.

Can the bank take that into account when calculating DSCR? Or are they required to use straight fiscal year numbers (including the poor 2024)?

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Reply by a lender
from Eastern Illinois University in 900 E Diehl Rd, Naperville, IL 60563, USA

I concur with the above comments. SBA lenders are going to focus on the last two tax years for underwriting purposes. You can use a trailing 12 months as well, but that is not going to do you much good when your last year, 2024 in this case, is your lowest year from a cash flow perspective. That could work if your last year was###-###-#### The only other option you have is if they maintain their books on an accrual basis but their tax returns on a cash basis. It might be possible to get a lender to base their credit decision on their books instead of their taxes. Happy to discuss at any time. You can reach me here or directly at redacted

Reply by a lender
in Falmouth, MA, USA

^redacted‌ I concur with Travis. The LTM will be critical in this case; however, 2023 is equally significant, as lenders generally prefer to review two years of financials, though there are occasional exceptions to this practice. Please do not hesitate to contact me at redacted if you would like assistance in structuring the transaction to align with both your risk thresholds and those of the lender.

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