Ep 21: Mythbusters: Cash Flow Over Collateral: How Lenders Really Assess Business Acquisitions
Description
In this episode of 7 Minute Takeover, Elizabeth MacRae and Eamonn Gamble break down one of the biggest misconceptions in buying a business—how lenders actually evaluate acquisition financing.
While real estate lending revolves around loan-to-value (LTV), business lenders care far more about cash flow and debt-to-EBITDA ratios. Eamonn explains why EBITDA is the gold standard for measuring a business’s debt capacity, how lenders “stress test” earnings, and what typical debt-to-EBITDA ranges look like. Elizabeth underscores why “cash is king” for lenders and how many buyers get blindsided when their high LTV expectations clash with weak cash flow.Key insights include:
- Why cash flow matters more than collateral in business lending
- Typical debt-to-EBITDA ranges lenders use to gauge debt capacity
- The role of buyer equity—why 10–20% is often the minimum
- How lender due diligence works (and why you should provide more than three years of financials)
- Strategies to secure better financing terms by creating a competitive lender process
If you’re thinking about buying a business, this episode will give you a clear, lender-focused perspective to avoid financing surprises and make stronger offers.
United States
