Senior Debt to EBITDA Ratio

March 06, 2025

by a searcher from University of Miami in Indianapolis, IN, USA

Hi all,

I'm working with a regional lender who is telling me that the highest they and most banks will be comfortable with is a 3:1 Senior debt to EBITDA ratio. Example: if EBITDA last year was $1M, the highest amount of senior debt they will be able to offer is $3M. Is this an industry standard, or just something this banker is saying?

I'm asking because it is causing issues with deals where I'd like to offer higher than a 3x multiple and leave some working capital in the business plus roll in project costs.

Thank you for any insights!

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

We are a Commercial Loan Brokerage Shop with over 500 different funding partners. We do a lot of conventional business acquisition financing. What the Bank is quoting you in true. There are not uniform rules across banking, but generally speaking we see most conventional banks that do business acquisition financing not want the senior debt leverage to be higher than a 2 to 3x multiple of adjusted EBITDA. There are times and certain industries where lenders will go higher and also certain lenders that may go a bit higher, but generally speaking the 2 to 3x range is the standard.

Now if you are looking to use SBA financing, most SBA lenders do not have a multiple minimum for senior debt leverage and those that do it tends to be much higher in the 3.5x to 5x range. That is because they have a government guarantee on 75% of the loan that helps mitigate their risk.

If you need help finding the right financing option or seeing what options are available for your specific transaction, I would love to jump on a call. You can reach me here or directly at redacted

Reply by a lender
from University of Southern California in Los Angeles, CA, USA

This is not true. It is all based on DSCR or the EBITDA/annual debt payments. Most SBA banks need 1.25 in the two most recent years. The minimum allowed by the SBA SOP is 1.15 in the most recent calendar year. I’d love to help you find the right SBA lender for this deal. We work with all the major SBA lenders. The bank pay us after your loan closes, so this is a 100% free service for you. I think this deal might qualify for pristine pricing. You can reach me here or directly at redacted You can also click here to schedule a meeting with me: https://cal.com/ishan-jetley-3d73m8/30min. Look forward to chatting!

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