SBA Business Acquisition Calculator
Use seller discretionary earnings to estimate a supportable purchase price, required buyer equity, standby seller note, SBA payment, and resulting DSCR.
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How the SBA Acquisition Calculator Works
The calculator starts with seller discretionary earnings, then subtracts the buyer's required salary, recurring capital spending, and other annual business debt. It divides the remaining cash flow by the target DSCR to estimate maximum annual debt service, then converts that payment capacity into a supportable SBA loan and purchase price.
Available Cash Flow = SDE - Buyer Salary - Other Annual Debt - Recurring Capital Spending
Maximum Annual Debt Service = Available Cash Flow / Target DSCR
Maximum Purchase Price = Maximum SBA Loan / (1 - Buyer Equity % - Standby Seller Note %)
Seller Notes and Equity Injection
The model treats the entered seller note as being on full standby with no principal or interest payments during the SBA loan term. A seller note does not automatically count toward the required equity injection. Current SBA requirements, the note terms, buyer contribution, and lender policy determine whether it receives equity credit.
What the Estimate Cannot Determine
A supportable payment does not establish eligibility or value. Lenders also review the quality of the seller's add backs, historical financial statements, tax returns, industry risk, buyer experience, working capital needs, collateral, business valuation, and post closing liquidity. Confirm normalized cash flow and the final sources and uses with the lender before relying on a purchase price.
SBA Acquisition Worked Example
Assume a business produces $500,000 of seller discretionary earnings. After subtracting a $120,000 buyer salary, $20,000 of other annual debt, and $30,000 of recurring capital spending, $330,000 remains before acquisition debt service. At a 1.25x target DSCR, the business supports up to $264,000 of annual acquisition debt service before the loan terms convert that payment into a maximum loan and purchase price.
Choosing Inputs and Reading the Result
Use normalized SDE supported by tax returns and financial statements rather than the seller's asking price presentation. Include a market based buyer salary and recurring capital spending that the business needs to maintain operations. A maximum purchase price is a cash flow limit, not a valuation, eligibility decision, or indication that the lender will accept every seller add back.
Frequently Asked Questions
How much business purchase price can SDE support?
The answer depends on required buyer salary, recurring capital spending, other debt, target DSCR, interest rate, term, and the proposed equity and seller note structure. The calculator converts the cash flow remaining after those deductions into a supportable loan and purchase price.
Can a seller note reduce the SBA down payment?
Only under qualifying terms and current program and lender requirements. A seller note may need to remain on full standby and does not automatically receive credit toward the required buyer equity contribution.
Should buyer salary be deducted from SDE?
Yes when the buyer will work in the business and needs compensation. Using a realistic market based salary helps prevent acquisition debt service from consuming cash flow needed for the buyer's role.