
What Is High-Leverage Risk in SMB Deals?
High-leverage risk in SMB acquisitions occurs when a buyer uses significant debt—often 70% to 90% of the purchase price—to fund a deal, amplifying both potential returns and financial vulnerability. High debt levels can strain cash flow, limit operational flexibility, and increase the risk of financial distress if revenue declines. To mitigate this, buyers should use conservative financial modeling, diversify funding sources (e.g., SBA loans and seller financing), and stress-test scenarios to ensure the business can withstand unexpected challenges.