Can the business pay for its own loan?
Coverage is the question that decides whether a deal happens, and the one most tools answer badly. Every figure here names its basis.
Prime 6.75% · as of 1 Aug 2026 · Federal Reserve H.15, August 2026 · set by Revanu
Covers the payments with $145K a year to spare above the 1.25× test.
This cash flow supports up to $248,000 of annual debt service at 1.25× — roughly a $1.58M loan over ten years. You are $116K a year under that ceiling.
Coverage is the business’s annual cash flow divided by what it owes on debt that year. At exactly 1.00× every dollar earned goes to the loan and nothing is left for a bad month. Lenders want a cushion — commonly 1.25× — because the alternative is a business that fails on its first slow quarter. Below the threshold is a statement about how the deal is put together, not about whether the business is any good.
Read on EBITDA. Coverage on SDE and on EBITDA are different numbers for the same business. Benchmarks, not offers, appraisals, or advice. Every result here shows the arithmetic that produced it so you can argue with it. Rates and fees vary by lender and by borrower.