Lenders are more cautious when lending to smaller businesses, especially those with less than $10 million in EBITDA. This may translate to a higher required DSCR for smaller businesses to compensate for the increased risk perceived by lenders. Investment bankers find it difficult to arrange senior debt for businesses with less than $10 million in EBITDA.

In California, capital gains are taxed at the same rate as regular income, which is unlike many other states. There is no distinction between long-term and short-term capital gains. California tax rates on capital gains range from 1% to 13.3%, and there may also be a "mental health" tax for high-income earners.

When selling your business, careful tax planning is essential to help lower the costs of the acquisition and minimize taxes for you as the seller. It's critical to understand the difference between short-term and long-term capital gains. Short-term capital gains, which come from assets held for a year or less, are taxed at your regular income tax rate. Long-term capital gains, from assets held for over a year, are taxed at a lower rate, but also include a 3.8% Net Investment Income tax. The structure of the sale—whether it's an asset sale or a stock sale—also has significant tax implications that will affect how much you take home from the deal.

Lenders assess other financial metrics in addition to DSCR. Banks consider ratios such as debt to cash flow and debt to net worth. Asset-based lenders also use Loan-to-Value ratios to evaluate risk. Lenders also consider factors such as: Revenue growth rate, Collateral, Cash flow, Quality of earnings, Operating history, Strength of the management team, Customer concentration, Industry.

When selling your business, it is important to seek out a CPA with experience in M&A transactions, ideally someone who has been involved in at least 5-6 transactions in the past 3 years. They should have more than 10 years of experience, with a deep understanding of multi-state implications and international compliance, if needed. Also, they should primarily work with businesses, and depending on the size of the sale, should be able to provide quality of earnings studies, tax and accounting due diligence, among other services. A good CPA should be able to discuss pros and cons of stock vs asset sale and identify potential issues.