How much debt can this business carry?
Lenders size senior debt with two tests at once: a leverage cap on EBITDA and a minimum debt service coverage ratio on cash flow. Enter both and see the maximum loan, which test binds, and how it moves with rate and term.
- Cash flow, not leverage, sets the limit: at 1.35x DSCR you can borrow 2.8x EBITDA, below the 3.5x cap.
Max debt if rate or term changes
Rows: interest rate. Columns: amortization period. Your case is outlined.
| Rate | 5 yrs | 7 yrs | 10 yrs |
|---|---|---|---|
| 7.5% | $9.29M | $12.16M | $14M |
| 8.5% | $9.05M | $11.75M | $14M |
| 9.5% | $8.82M | $11.37M | $14M |
| 10.5% | $8.59M | $11M | $13.81M |
| 11.5% | $8.38M | $10.65M | $13.24M |
Repayment schedule at max debt
| Year | Opening | Interest | Principal | Closing | DSCR |
|---|---|---|---|---|---|
| 1 | $11.37M | $1.08M | $1.22M | $10.15M | 1.35x |
| 2 | $10.15M | $964.18K | $1.33M | $8.82M | 1.35x |
| 3 | $8.82M | $837.63K | $1.46M | $7.36M | 1.35x |
| 4 | $7.36M | $699.05K | $1.6M | $5.76M | 1.35x |
| 5 | $5.76M | $547.31K | $1.75M | $4.01M | 1.35x |
| 6 | $4.01M | $381.16K | $1.92M | $2.1M | 1.35x |
| 7 | $2.1M | $199.22K | $2.1M | $0 | 1.35x |
Acquifolio keeps term sheets, covenants and debt schedules with the deal, and monitors covenant headroom after close.
Assumes flat EBITDA, capex and taxes over the loan life and a single senior tranche. Not investment, tax or legal advice. Everything runs in your browser and nothing you enter is stored or sent.
How it works
Leverage test: max debt = EBITDA × leverage cap.
Coverage test: cash available for debt service (EBITDA − maintenance capex − cash taxes) divided by the minimum DSCR gives the largest annual payment allowed. That payment is converted to a loan amount using your rate, amortization period and repayment style.
The lower of the two is your capacity. Coverage usually binds when rates are high or amortization is short.
Questions
What DSCR do lenders require?+
Bank and SBA lenders commonly look for 1.25x to 1.50x on senior debt service. Cash-flow lenders in sponsor deals focus more on leverage and fixed-charge coverage covenants.
Why does the coverage test sometimes allow less debt than the leverage cap?+
Coverage depends on cash conversion, rate and amortization. A capex-heavy business or a short amortization period can fail coverage well before it reaches the leverage cap.
Does this include a revolver or unitranche?+
No. It sizes a single amortizing senior tranche. Use the LBO model to layer senior and subordinated debt with a cash sweep.
Debt coverage by year, cash after debt service, IRR and the max price that hits your target.
Open tool Deal screeningLBO ModelSources & uses, senior and sub debt paydown with cash sweep, returns attribution and an entry × exit grid.
Open tool Deal screeningIRR & MOIC CalculatorXIRR on dated cash flows, MOIC, DPI-style multiples and an IRR ↔ MOIC conversion table.
Open toolAcquifolio connects sourcing, diligence evidence, the investment committee, the portfolio and your LPs, so every number keeps its source.