As you can see from this example, the SBA requires a minimum coverage but most lenders are more conservative and increase that ratio. Many lenders also have different ratios for specific industries, depending upon their portfolio and the performance of each. We do know of a lender that requires a 1.65x coverage for a particular industry. The other item of note is that most lenders do not disclose, unless asked, what ratios are required for the loan application to be considered.
When considering cash flow coverage ratios, we must review and address the last three years of tax returns (or financial statements) along with the interim financials of the company. The SBA requires 1.15x on the last full year, but nothing on previous years. Lenders may have different criteria (multiple years) when approving the loan application, but this is an internal policy required by that specific lender.
When it comes to determining cash flow and what is required to complete your transaction, keep the surprises to a minimum and understand what you are presenting before you present it, always!