Why Lenders Look Past the Business
Every SBA 7(a) loan carries an unlimited personal guarantee from owners of 20% or more, so the lender's real question is whether the whole economic unit, company plus household, stays solvent. Global DSCR answers that in one number, which is why it decides deals that business-only math would approve.
When you buy or start a business with an SBA loan, you personally guarantee it.[1] That guarantee means your mortgage, your car payments, and your grocery bill compete with the business loan for the same dollars. Underwriters model that directly instead of hoping it works out, and a surprising number of borrowers first hear the word "global" in their decline call.
The practical consequence: you should run this number on yourself before a lender does. The free global DSCR calculator does it in about a minute.
The Formula (Bank Convention)
The standard bank convention: add business cash flow available for debt service to all verifiable household income, subtract household living expenses, then divide by every debt payment, the proposed SBA loan, surviving business debt, and all personal debt service from the credit report.
Global DSCR = (Business Cash Flow + Household Income − Living Expenses)
÷ (Business Debt Service + Personal Debt Service)
- Business cash flow: EBITDA or seller's discretionary earnings with documented add-backs (the salary being replaced, one-time costs, interest on refinanced debt).
- Household income, spouse wages, rental income, anything recurring and verifiable on tax returns.
- Other businesses you own, "global" is literal: the lender folds in the net cash flow of every business you own or control (all disclosed on SBA Form 1919). A profitable second business helps your ratio; one that loses money is a drain the lender counts against you, and its loan payments go in the denominator.
- Living expenses, what the household spends to live, excluding debt payments (those belong in the denominator, not here).
- Debt service, the new SBA payment, your other businesses' loan payments, plus personal mortgage, autos, student loans, and card minimums.
A Worked Example: Strong Business, Declined Deal
A business producing $180,000 of cash flow against a $95,000 loan payment shows a 1.89× business DSCR, comfortably bankable. Add a $90,000 household budget and $42,000 of personal debt payments, and the global ratio falls to 1.09×. That clears the SBA's 1:1 global floor, but it sits well under the 1.25× many lenders underwrite to, so the deal is likely to get cut back or declined.
| Line | Amount |
|---|---|
| Business cash flow available for debt service | $180,000 |
| Other household income (spouse W-2) | $60,000 |
| Household living expenses | ($90,000) |
| Cash available for all debt | $150,000 |
| SBA loan debt service (~$620k at Prime + 2.5%, 10 yr) | $95,000 |
| Personal debt service (mortgage, autos, student loans) | $42,000 |
| Total debt service | $137,000 |
| Business-only DSCR ($180,000 ÷ $95,000) | 1.89× ✓ |
| Global DSCR ($150,000 ÷ $137,000) | 1.09× (thin) |
Same business, same buyer, two verdicts. Fixes that work in this example: borrowing $75,000 less (−$11,500/yr of debt service) and retiring an auto loan before closing (−$9,600/yr) lifts the global ratio to $150,000 ÷ $115,900 = 1.29×, bankable.
The Thresholds and the Stress Test
SOP 50 10 8.1 sets the global minimum at just 1:1 (break-even). The business-level floors are separate: on a business purchase, 1.25× for a first-time buyer and 1.15× for a same-industry expansion, both on the seller's historical results; on loans that aren't purchases, 1.15× (1.10× for 7(a) Small loans of $350k or less). On the global ratio, many lenders hold an internal standard around 1.25× and some re-run it assuming a 10% decrease in cash flow; 1.50× is considered strong.
| Global DSCR | Lender read |
|---|---|
| Below 1:1 | Below the SOP global minimum, decline risk without restructuring |
| 1:1 to 1.24× | Clears the SBA 1:1 floor, under many lenders' 1.25× standard, expect scrutiny and stress-testing |
| 1.25× to 1.49× | Bankable at the common lender threshold |
| 1.50×+ | Strong, survives the 10% stress test with room |
How to Fix a Thin Global DSCR
Five levers move the ratio: borrow less, inject more equity, retire small personal debts before applying, document every source of household income, and put any seller note on full standby. Each one either raises the numerator or shrinks the denominator, run them in the calculator before your lender meeting.
- Borrow less / inject more. Every $100,000 less borrowed cuts roughly $15,000/yr of debt service on a 10-year note at current rates.
- Retire small personal debts pre-close. Paying off a $15,000 auto loan can remove ~$9,600/yr from the denominator, often the cheapest DSCR points available.
- Document household income properly. Spouse wages and rental income count when verifiable; undocumented income counts for nothing.
- Structure the seller note on full standby. A full-standby note (no principal or interest payments for the term of the SBA loan; interest may accrue) adds no debt service. An amortizing one does, and an interest-only seller note that isn't on full standby is counted as if amortized over 10 years or less.
- Right-size living expenses honestly. Lenders sanity-check the personal financial statement against credit and bank activity, lowballing gets caught and costs credibility.