Why Tight SBA Lending Isn’t the End of the Road

The Truth About Tighter SBA Lending (And Why It Doesn’t Matter If You Know What You’re Doing)

If you've been watching the M&A space recently, you've probably seen the headlines:

Sounds like chaos, right?

Let’s clear this up — because at Acquire Weekly, we work with serious buyers every day, and here's what we're really seeing:

💵 What's Actually Happening?

Over the last 90 days, SBA lenders — especially major players like Live Oak, Huntington, and Wells Fargo — have gotten stricter on what deals they’ll approve.

Why?

Because they’re more cautious about risk and debt load. Here’s what they want now:

• More buyer equity (15–20% instead of 10%)
• More seller financing
• Lower debt-to-income ratios
• Higher Debt Service Coverage Ratio (DSCR)

🔎 Wait... What’s DSCR?

DSCR = Net Operating Income ÷ Annual Debt Payments

This ratio shows how well a business’s profits can cover loan payments.

A DSCR of 1.25x means you have $1.25 in income for every $1.00 in debt obligations — a healthy margin.

But banks are now looking for 1.5x+ in many cases. That means thinner-margin or high-debt deals won’t get through.

🚫 Why This Isn’t a Bad Thing

Here’s the hard truth:

If a deal only worked when DSCR requirements were loose…
It was never a strong deal to begin with.

If the loan barely got approved under a 1.25x DSCR, what happens if:

• Sales slow?
• Costs rise?
• Your ramp-up takes longer than expected?

You’d be stuck making debt payments with zero margin for error.

At Acquire Weekly, we’ve helped buyers navigate hundreds of deals — and the best ones always passed a worst-case scenario test.

🧠 How We Stress Test Every Deal

Whether we’re sourcing a med spa or a plumbing company, we look at the downside, not just the upside:

• What if revenue drops 15% after acquisition?
• What if payroll costs rise by 10%?
• What if it takes 6 months longer to replace the owner?

If the business still cash flows and covers debt under those assumptions, we move forward.

If not — we walk.

This mindset builds anti-fragile portfolios.

📉 A Real-World Example

One of our recent clients looked at a car wash listed for $1.2M with $300K SDE.

Old SBA rules: He could’ve closed with $120K down.
New SBA rules: Needs $180K down and seller to hold a $200K note.

Result?
• He negotiated the seller hold.
• Added a working capital clause.
• Got lender approval — no drama.

Strong deals find a way. Weak deals get exposed.

Final Take

Yes, the lending environment is changing.
No, it’s not a death sentence for acquisitions.

In fact, this is when the best buyers shine — because they underwrite deals with discipline, creativity, and real risk tolerance.

If you do the same, you’ll keep closing great deals — even while everyone else complains on Twitter.

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👉 Want Deal Flow That Passes the Downside Test?
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Let’s help you buy better — and safer.

—
Jorge Viveros & Rahul Issar
Co-Founders, Acquire Weekly
www.acquireweekly.com | Your Partner in Buying Better Businesses