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How to Calculate Debt Service Coverage Ratio [Tool]

How to Calculate Debt Service Coverage Ratio [Tool]

Debt Service Coverage Ratio compliance often is required or necessitated by covenants in a bank loan agreement. A bank loan covenant regarding the debt service coverage ratio will specify the amount of income a business and/or its guarantor must generate relative to the debt principal and interest payments on an annual basis to remain in compliance with the covenant. The business owner, or his or her CFO or Controller, should monitor this ratio carefully on a monthly basis so the covenant is not unintentionally broken.

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What is a Debt Service Coverage Ratio?

What is a Debt Service Coverage Ratio?

The debt service coverage ratio is a measurement used by lenders to determine if a business is able to meet its debt servicing obligations through its operating income during a given period of time. In most cases, a lender wants the operating income to exceed the debt servicing costs by some measure. This ratio defines the extent to which a business’s operating income (or other defined measure of cash flow) exceeds the cost to service its bank loans.

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The Advantages of Buying an Existing Business

The Advantages of Buying an Existing Business

Most individuals who consider themselves entrepreneurs believe they must start their own business to earn the title. However, what some do not realize is that the entrepreneurial spirit can be fulfilled in a variety of ways, not the least of which is purchasing an existing business. The following is a list of advantages for buying a business over starting one from scratch.

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Employees Ownership Incentives — Implications When You Sell

Employees Ownership Incentives — Implications When You Sell

Many entrepreneurs faced with the demands on cash of a growing business are tempted to sell equity to outside investors, or perhaps give away stock to retain a valuable employee. Diluting your stake in this way may solve the immediate problem, but it can have unforeseen consequences when the business eventually is sold. Stockholders’ personal circumstances evolve in different ways over the lifetime of a company, and whatever the original intention everyone may not be on the same page when you are ready to sell.

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Non-Solicitation Agreement | How to Keep Your Best Employees

Non-Solicitation Agreement | How to Keep Your Best Employees

If you’ve grown a valuable business, there is no doubt your employees are a big part of your success. You also know that hiring, training, and managing a great team of productive employees is a difficult task. And keeping your best employees is yet another accomplishment! But the painful truth is your competition would be very pleased to hire away your best employees.

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