CFADS (Cash Flow Available for Debt Service)
Adj EBITDA − Taxes − Maintenance CapEx − Change in NWC − Owner SalaryCFADS approximates the cash flow available to service acquisition debt after essential expenses. It deducts a reasonable owner salary replacement, estimated taxes, maintenance capital expenditures, and working capital changes from Adjusted EBITDA.
How it's used in a deal
Used to calculate DSCR and determine maximum debt capacity. SBA lenders focus heavily on this metric.
Worked example
Fictional Precision Auto Service, FY 2024. Missing inputs remain unavailable.
CFADS: Not available. Requires supported earnings and two complete working-capital snapshots; DSCR also requires debt service.
Inputs and supported results from our fictional sample deal report — Fictional, incomplete example. No real customer documents, verified source support or independent accountant review are supplied.
Important caveat
This is an approximation for screening purposes. Actual CFADS depends on specific deal structure and entity type.
Frequently asked questions
Why does CFADS subtract an owner salary when SDE adds it back?
SDE measures the total benefit to an owner-operator. CFADS asks a different question: after you pay yourself a livable salary, what's left to pay the bank? A deal that looks great on SDE can fail on CFADS once a realistic salary comes out.
What owner salary should I assume?
The market rate to hire someone to run the business — not the minimum you could survive on. SBA lenders typically sanity-check this figure, and underestimating it is the most common way buyers talk themselves into unfinanceable deals.
Review CFADS for your acquisition
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Related metrics
Educational content from a decision-support tool — not a CPA audit, review, or assurance engagement, and not tax, legal, or investment advice.