Global DSCR: why 1.25x is the real minimum even when the SOP says 1.15x
SBA sets a 1.15x floor. Most preferred lenders underwrite to 1.25x global. Here is the arithmetic behind the gap and how to package a deal that clears both.
Two numbers, two audiences
The SOP's 1.15x applies to the business cash flow after the proposed debt. Lender credit policy applies a cushion for the guarantors' household and affiliates, which is where global coverage comes in. A deal at 1.18x business and 1.09x global is eligible on paper and declined in practice.
What moves global coverage
Personal mortgage payments, auto loans, student debt and support obligations all sit in the denominator. W-2 income from outside employment and rental cash flow from Schedule E sit in the numerator. Living expenses are usually a lender-set percentage of gross income.
- Pull the credit report early; personal obligations surprise more deals than business numbers.
- Rental properties with negative cash flow reduce global coverage even when they have equity.
- Affiliate losses flow through; affiliate profits often require a distribution history to count.
Packaging the cushion
Present the sensitivity: coverage at +200 basis points and at a 10% revenue decline. A memo that shows the deal still clears 1.15x under stress reads as underwritten, not sold.