Multiples lag. Financeability moves first.

Every time the Fed moves, or even signals it might, the reflex in acquisition circles is to ask what happens to multiples. It is the wrong first question, because multiples are a lagging indicator. A closed deal reflects a negotiation that started months earlier, under a rate environment that may no longer exist by the time the paperwork clears. If you are trying to read the market in real time rather than in the rearview mirror, multiples are the last place the signal shows up, not the first.

The faster-moving signal sits one layer underneath the price: financeability. In the deal sizes we track, sub-five-million-dollar acquisitions, the debt is overwhelmingly SBA 7(a) paper, not conventional commercial lending. That matters because SBA financing is standardized enough that a rate move translates almost mechanically into a change in what multiple a given cash-flow number can actually support, well before that shift shows up in a closed-deal multiple anywhere.

Here is the mechanism in plain terms. A buyer's lender sizes the loan off the target's SDE, applies a down payment, an interest rate, and a term, and checks whether the resulting annual debt service still leaves the business comfortably profitable, the debt service coverage ratio, or DSCR. Lenders generally want to see 1.25 or higher: the business needs to generate at least a quarter more cash than its loan payments require. Below 1.0, the deal cannot service its own debt on paper. Between 1.0 and 1.25, it is financeable but thin. When rates rise, the monthly payment on the same loan amount rises with them, DSCR compresses, and at some point a deal that used to clear the lender's bar no longer does, at the SAME asking price and the SAME SDE. Nothing about the business changed. The financing math did.

We built exactly this calculation into OA's own product, because it is the single most useful filter a buyer can apply before wasting time on a deal that will never get financed. The tool runs three standard scenarios, conservative, base, and optimistic, each with its own down payment, term, and rate assumption, and returns a DSCR and a pass, tight, or fail read for whatever deal you point it at.

Rate sensitivity doesn't hit the median deal. It hits the deals already sitting close to the financing edge.

Running it against a real listing makes the abstraction concrete. Take the median Food & Beverage business currently on our platform: $249,000 asking price, $121,342 in seller's discretionary earnings. Under the calculator's base-case assumptions, 10% down, a 10-year term, 10.5% interest, that loan amount works out to $224,100, a monthly payment of roughly $3,024, and $36,287 in annual debt service. Against $121,342 of SDE, that is a DSCR of 3.34, nearly three times the lender's minimum bar. Push the rate up 200 basis points to 12.5%, a genuinely large move, and the DSCR only drops to 3.08. Still comfortably passing.

That is the finding worth sitting with: at the median, this deal size is nowhere near the financing edge. A 200-basis-point rate shock barely moves the needle. Rate sensitivity is real, but it does not bite the typical deal in this segment. It bites the deals that were already thin, priced at a rich multiple relative to their cash flow, or structured with less money down, where a DSCR of 1.3 today becomes 1.1 or worse after a real rate move, and a deal that used to clear the bar suddenly doesn't.

The practical takeaway for a buyer, especially one competing against other bidders in a hot process: financeability compresses fastest for higher-multiple, thinner-margin deals, and barely at all for well-priced, cash-generative businesses at typical multiples. If you want an early read on where a rate move will actually change outcomes, don't wait for the closed-multiple data to catch up months later. Run the DSCR math on the specific deal in front of you, today, at both the current rate and a stressed rate. That tells you whether you're looking at a deal that can absorb a rate shock or one that can't, and it tells you before anyone else in the process has bothered to check.