Financing and DSCR underwriting
Know what the lender will say before you sit down with the lender.
Model senior debt, mezzanine, seller notes and earnouts. Compute Debt Service Coverage Ratio on cash actually available for debt service, stress it, solve for capacity, and export a credit memo.
Why it matters
Lenders won't fund an acquisition unless they're confident the business can repay the debt. This module helps you model different financing structures, test them against the business's cash flow, and identify potential risks before you present to a lender. We have not found another tool at a sponsor's price point that does this.
The formula, stated the way a lender states it
CADS = Adjusted EBITDA − Maintenance CapEx − Cash Taxes − Working Capital Adjustment − Other Outflows
DSCR = CADS ÷ Annual Debt Service
The numerator is not EBITDA. It is the cash left after the real cash costs a lender knows are there. A model that divides EBITDA by debt service flatters the deal; this one does not.
What you do in it
- Scenarios. Base case, aggressive case, lender case. Duplicate, compare, select one as active. Each scenario is Draft, Final or Archived, and the status travels into the memo, the credit memo and the MCP context so nobody mistakes a draft for the structure you presented.
- Debt instruments. Senior term loan, mezzanine, seller note, earnout, each with rate, term, amortization and an "Included in DSCR" flag so a full-standby seller note stays in leverage but out of coverage, exactly as a credit agreement treats it. Instrument templates for SBA 7(a) on US-dollar deals and CSBFP (Canada Small Business Financing Program) on Canadian-dollar deals, with the program name carried into the credit memo.
- Underwriting. DSCR, senior DSCR, interest coverage, free cash flow, total and senior leverage. Every ratio is labelled against four health bands your organization configures: Strong, Acceptable, Caution, Below minimum.
- Stress tests. Standard downside shocks to earnings, capex, taxes, working capital and interest rate, plus a combined case that stacks them. Every stress moves CADS the adverse way; a stress can never improve the result, and a stress that moved nothing is reported as not applied rather than passed.
- Debt capacity. Enter a target DSCR and the module solves for the maximum supportable debt, held down by whichever configured limit binds.
- Risk summary. Flags such as Senior Leverage Too High, with severity, that carry into the memo's Risk Factors.
A coverage ratio read against the bands
How it connects
Closed until a QoE period is locked. A scenario linked to QoE reads its Adjusted EBITDA from the most recent locked period; the working-capital adjustment is an amount you enter on each scenario. The selected scenario is the one the memo prints; if none is selected, the memo says so rather than printing a stale ratio.
What comes out of it
- A credit memo PDF: the structure, each instrument with its type and its DSCR flag, the coverage and leverage ratios, and the currency mark on every figure.
- The Financing Structure section of the investment memo, including the stress-test results, counted the same way as the Stress Test Overview in Financing.
- A negative CADS reads as a negative DSCR everywhere, because a lender needs to see it.
Questions
Whose thresholds?
Yours. Admin → Financing Thresholds sets the DSCR bands, and every band, colour and risk flag follows them. Product defaults are 1.50× Strong, 1.25× Acceptable, 1.10× Caution.
Can I model an SBA 7(a) or CSBFP structure?
Yes. Create the instrument from the template, and the loan program name is carried into the credit memo and the debt-capacity estimate.
Join the waitlist for the 14-day trial.
Sign-up is not open yet; we will email you when it opens.