A leverage multiple expresses an acquisition’s total interest-bearing debt as a ratio to a specified earnings measure — usually EBITDA — describing how much debt a capital structure carries relative to the cash flow available to service it.
No Canadian regulator, lender association or statistics agency in this review publishes a standard or typical leverage multiple for private Canadian acquisitions, and nothing here should be read as implying one. What is sourced is the mechanism that actually limits leverage on a given file: a leverage-ratio covenant and a DSCR that the deal must clear, not a headline ratio quoted in advance.
One real, published number does function as a leverage ceiling for its slice of the deal: the CSBFP’s $1.15 million maximum loan applies regardless of the target’s size, so for a smaller acquisition the programme’s own loan cap — not any EBITDA ratio — can be the binding constraint on that tranche before a lender ever runs its own leverage math.
In practice, the covenant package is what does the work a single leverage number cannot: a lender documents a leverage covenant — “limits on how much total debt the business carries relative to its earnings or equity” — alongside a DSCR floor, and it is routinely the DSCR test, not the leverage ratio, that binds first when earnings soften, because DSCR reacts to a cash-flow dip immediately while a leverage ratio measured against a slower-moving debt balance can lag behind it.
A target generates $1,000,000 of EBITDA — right at the point where underwriting typically shifts from SDE to EBITDA. The buyer proposes acquisition debt of $2,800,000, a 2.8-times leverage multiple the buyer and lender negotiate for this file specifically. At an illustrative all-in rate of 9 percent, amortizing over seven years, annual debt service (principal and interest) works out to roughly $556,000. Tested against a DSCR floor of 1.30 times on EBITDA, the maximum debt service the lender will actually underwrite is $1,000,000 divided by 1.30, or $769,231 — comfortably above the $556,000 this structure requires, so the deal clears on DSCR even though the 2.8-times multiple itself was never checked against any published benchmark, because none exists.
See also: debt service coverage ratio, financial covenant and Canada Small Business Financing Programme.
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