SBA Business Acquisition Calculator: The Highest Price This Business Supports, and What the Seller Is Asking
A business listing is written to make one number look large and two numbers disappear. The large one is SDE. The two that disappear are how much of it a lender will actually accept, and the price that the remainder can carry once you have paid yourself. This page rebuilds the deal the way the credit memo will: retype the listing, and it returns the highest price an SBA 7(a) lender can finance, against what the seller is asking.
The asking price fits under the ceiling
Disallowing 30% of the add-backs takes SDE from $400,000 to $364,000, a fall of 9.0%. After a salary of $120,000 for you, $244,000 a year is left to service debt. At a coverage ratio of 1.15 the business supports a price of about $1,443,246 — 3.96 times adjusted SDE. The asking price of $1,200,000 sits inside that, with $243,246 of room. At the asking price the coverage ratio is 1.37 against a requirement of 1.15. These are the SBA programme rules, not a lender's own credit policy. Many lenders require a coverage ratio of 1.25 or higher and will lend less than the programme allows.
Underwritten under SOP 50 10 8
Under this rulebook the required injection cannot be reduced or eliminated for this transaction type. There is no lender discretion to ask for.
The injection is measured on total project cost — the purchase price plus working capital and closing costs, not the price alone.
SOP 50 10 8.1 takes effect on 1 October 2026 and replaces version 8's single change-of-ownership equity rule with four transaction types. It is usually reported as removing a lender's ability to reduce the injection; against the documents it does the opposite. Version 8 requires the 10% and never grants that discretion at all, and 8.1 grants it for the first time, for business expansions and owner buyouts only. If your closing might slip across that date, model it both ways.
The earnings a lender will actually underwrite
The listed figure, less the add-backs diligence removes, less your salary.
The broker's multiple on the listed figure is 3.00×. On the earnings a lender underwrites it is 3.30×. Those are the same price described two different ways, and only the second one is the one being financed.
How that becomes a price ceiling
The coverage test, run backwards.
Read forwards, the coverage ratio is a test a deal either passes or fails. Read backwards it is this: a ceiling on the price, set by the earnings and the terms. Almost nobody runs it backwards before making an offer, which is why so many deals die in month three.
The deal at the asking price
Total project cost, the injection required, and what the loan costs each month.
The cash left on the last line is what the business generates after your salary and every loan payment. It funds tax, capital expenditure, working capital swings and any bad quarter. A deal that leaves nothing there has no margin for the year that goes wrong.
Programme limits this deal meets
Hard caps in SOP 50 10, not lender preferences.
What the lender's coverage ratio costs you
Same business, same terms, one number changed.
| Coverage ratio | Maximum price | Multiple | vs your setting | At the asking price |
|---|---|---|---|---|
| 1.15× (SBA floor) | $1,443,246 | 3.96× | — | Asking price fits |
| 1.20× | $1,379,986 | 3.79× | −$63,260 | Asking price fits |
| 1.25× | $1,321,786 | 3.63× | −$121,460 | Asking price fits |
| 1.35× | $1,218,321 | 3.35× | −$224,925 | Asking price fits |
| 1.50× | $1,088,989 | 2.99× | −$354,257 | Asking price is above it |
Nothing about the business changes down this column. Every figure is the same earnings, the same term and the same rate — only the ratio moves. That is why the ratio is the first question to ask a lender and the rate is the second.
What the add-backs are worth
The range diligence decides, priced.
| Add-backs disallowed | SDE underwritten | Maximum price | vs your setting | At the asking price |
|---|---|---|---|---|
| 0% disallowed | $400,000 | $1,667,250 | +$224,004 | Asking price fits |
| 15% disallowed | $382,000 | $1,555,248 | +$112,002 | Asking price fits |
| 30% disallowed | $364,000 | $1,443,246 | — | Asking price fits |
| 45% disallowed | $346,000 | $1,331,244 | −$112,002 | Asking price fits |
| 60% disallowed | $328,000 | $1,219,243 | −$224,004 | Asking price fits |
A dollar of add-back is not worth a dollar of price — it is worth a multiple of it. That is the whole reason a seller's schedule of add-backs is the most carefully written page in the package, and the reason a quality of earnings review usually pays for itself several times over.
What to do before you sign a letter of intent
Steps that follow from your figures.
- At these assumptions the price clears the SBA floor with $243,246 of room and coverage of 1.37. Treat that room as your margin for the add-backs diligence disallows, not as spare borrowing capacity.
- Ask the broker for documentation on every add-back before you offer. On your figures, disallowing 30% of them removes $36,000 of earnings and $224,004 of price. That difference is what a quality of earnings review is for.
- Ask each lender for the coverage ratio they underwrite to before you ask for a rate. At the SBA floor of 1.15 this deal supports $1,443,246; at a 1.25 overlay it supports $1,321,786. The ratio moves more money than the rate does.
- Take the listing to an SBA district office, a Small Business Development Center or SCORE before you sign a letter of intent. None of them are paid on the closing, which is not true of anyone else in the transaction.
How this works
Three numbers decide whether the deal happens. The first is SDE after diligence, because add-backs are where the price comes from and a share of them will be disallowed. The second is the debt-service coverage ratio: SBA requires at least 1.15, which is not a guideline but the binding constraint on price — given the earnings a lender accepts, your salary and the loan terms, there is a maximum the business can carry, and most first-time buyers discover it months into a deal rather than before the letter of intent. The third is which rulebook applies, because SOP 50 10 8.1 takes effect on 1 October 2026 and changes the change-of-ownership equity rules, so this page selects the version from your expected closing date rather than assuming today's.
A listing at $1,200,000 shows SDE of $400,000, of which $120,000 is add-backs. Take a salary of $120,000, borrow over ten years at 9.5% with 10% down, and expect diligence to disallow 30% of the add-backs. SDE becomes $364,000, $244,000 is left to service debt, and at the 1.15 floor the business supports about $1,443,000 — so the asking price fits, with roughly $243,000 of room and a coverage ratio of 1.37. Accept every add-back instead and the ceiling rises to about $1,667,000: that one judgement is worth $224,000 of price. Put the same deal in front of a lender with a 1.25 overlay and the ceiling falls to about $1,322,000 — $121,000 of price, bought by a ratio the SBA does not require.
1.15 is the SBA floor, not the number your lender will use. The gap between the programme rule and the lender's overlay is worth six figures on a million-dollar deal, and it is negotiable in a way the seller's asking price often is not.
Add-backs are where the price comes from
SDE is net income plus the owner's salary plus everything else added back: the car, the phone, the family member on payroll, the legal bill described as one-off, the depreciation. A broker's job is to build the largest defensible SDE, and then apply a multiple to it.
That means the price is a multiple of a number the seller assembled. Every dollar of add-back a lender or a quality of earnings review disallows removes not one dollar of value but roughly a multiple's worth — three or four dollars of price on a typical small business.
This page asks you for a share to disallow rather than guessing one, because the honest answer depends on what the add-backs are. A one-off legal settlement is defensible. A salary for a relative who did real work is not an add-back at all if you must replace them.
The coverage ratio is the price, not a formality
SOP 50 10 states that the applicant's debt service coverage ratio must be at least 1.15 on a historical or projected cash flow basis, and 1:1 globally. Read forwards it is a test. Read backwards it is a ceiling: the annual cash left after your salary, divided by 1.15, is the largest debt service the deal can carry, and that service sets the largest loan, which sets the largest price.
Almost nobody runs it backwards before making an offer. The usual sequence is to agree a price, spend three months and several thousand dollars on diligence, and then learn that the loan does not clear coverage.
Running it first turns the letter of intent into an informed document. It also tells you exactly how much the price would have to fall to work — which is a far better negotiating position than discovering the shortfall after the seller has stopped talking to other buyers.
1.15 is the floor. Your lender's number is higher
1.15 is what the SBA requires. It is not what most lenders require. Overlays of 1.25 are routine and 1.35 or 1.50 are not unusual, particularly for a first-time buyer, an asset-light business, or a seller-dependent one.
On the worked example above, moving from the SBA's 1.15 to a lender's 1.25 removes about $121,000 of the price the deal supports. Nothing about the business changed. The difference is one lender's policy.
So the ratio is an input on this page rather than a constant, and the right use of it is to shop it. Ask each lender what coverage ratio they will underwrite to before you ask them for a rate — it moves more money than the rate does.
Your own salary comes out first
SDE is called discretionary earnings because it includes what the owner pays themselves. If you buy the business and work in it, that money is not available to service debt — you have to live.
Models that skip this step are not conservative or aggressive, they are wrong, and they are extremely common in spreadsheets circulated by brokers. The lender will not skip it.
The figure to use is what it would cost to hire someone to do your job, not the least you could survive on. If the business needs a general manager and you are that manager, the salary belongs in the model whether or not you draw it.
1 October 2026 changes the equity rules — not in the direction usually reported
SOP 50 10 8.1 takes effect on 1 October 2026 and replaces version 8's single change-of-ownership equity rule with four transaction types. The figure stays at 10%, and the headline you will read elsewhere is that 8.1 removes a lender's ability to reduce it. Read against the two documents, that is backwards.
Version 8 says of a complete change of ownership: “At a minimum, SBA requires an equity injection of at least 10 percent of the total project costs … for such transactions.” It grants the lender no discretion to reduce or eliminate it — the phrase “reduce or eliminate” does not appear anywhere in SOP 50 10 8. Version 8.1 then says the injection on an Initial Acquisition “cannot be reduced or eliminated”, which for a first-time buyer states explicitly what version 8 already required. Nothing changes for them on 1 October.
What 8.1 actually adds is discretion that did not previously exist, for two transaction types: “For both Business Expansions and Owner Buyouts, the Lender may reduce or eliminate this requirement” where the borrower has sufficient liquidity and working capital, subject to conditions on permanent working capital and on net worth. ESOP and Cooperative transactions are listed at the same 10% but are not named in that sentence, so this page does not treat them as reducible.
8.1 also moves the base for one type. An Owner Buyout's requirement is “based upon the purchase price of the business, as reflected in the purchase and sale agreement” rather than on total project cost — a smaller base, and so a smaller injection. That is why the page asks for a closing date and a transaction type, and why the answer for a partner buyout genuinely differs either side of 30 September.
The programme caps you will meet
A single Standard 7(a) loan cannot exceed $5,000,000. Financing intangible assets, including goodwill, cannot run longer than ten years — which is the binding term for most acquisitions, because most of the price of a service business is goodwill. A longer term entered here is capped to it, and the shorter amortisation is exactly why acquisition coverage is tighter than a mortgage buyer expects.
The interest rate is capped too, as a spread over prime that narrows as the loan grows: 6.5 points on loans to $50,000, 6.0 to $250,000, 4.5 to $350,000, and 3.0 above that. On a seven-figure acquisition the ceiling is prime plus three.
Real estate in the deal can be financed over 25 years, which changes the arithmetic substantially. This page models a single term loan and does not split the structure, so treat a deal with significant property as needing its own model.
A financeable price is not a fair price
Everything here answers one question: what will an SBA lender finance? That is a necessary condition for the deal to happen and it is not a valuation.
A business can clear coverage comfortably and still be a poor purchase — customer concentration, a retiring owner who is the relationship, a lease that ends, a contract up for renewal, deferred maintenance, a market in decline. None of it appears in a coverage ratio.
Use this to find the ceiling, then spend the diligence budget on whether the earnings are durable. The SBA's free advisers — district offices, Small Business Development Centers and SCORE — are not paid on the closing, which makes their reading of a listing worth more than a broker's.
The SBA rules this page applies
Each of these comes from the bound SOP pack and is read by the engine at run time rather than written into the code. The equity rows differ by version, which is why the closing date is an input.
| Rule | SOP 50 10 8 (to 30 Sep 2026) | SOP 50 10 8.1 (from 1 Oct 2026) |
|---|---|---|
| Debt service coverage ratio, minimum | 1.15 (1:1 global) | 1.15 (1:1 global) |
| Maximum single Standard 7(a) loan | $5,000,000 | $5,000,000 |
| Maximum maturity, goodwill and intangibles | 10 years | 10 years |
| Maximum maturity, real estate | 25 years | 25 years |
| Equity injection, initial acquisition | 10%, SBA requires it — no lender discretion | 10%, cannot be reduced or eliminated |
| Equity injection, business expansion | 10%, no lender discretion | 10%, lender may reduce or eliminate on liquidity conditions |
| Equity injection, owner buyout | 10%, no lender discretion | 10%, lender may reduce or eliminate on liquidity conditions |
| Equity injection, ESOP or cooperative | 10%, no lender discretion | 10%, not named among the reducible types |
| Base the injection is measured on | Total project cost | Total project cost, except an owner buyout: purchase price |
| Maximum variable rate over prime | 6.5 / 6.0 / 4.5 / 3.0 points by loan size | 6.5 / 6.0 / 4.5 / 3.0 points by loan size |
The rate spreads apply to loans of $50,000 and less, $50,001 to $250,000, $250,001 to $350,000, and $350,001 and higher respectively, in both versions. Under either version, a loan to an ESOP purchasing a controlling interest of at least 51% in the employer is exempt from the equity injection requirement altogether; under version 8 an acquisition by an existing business in the same 6-digit NAICS code, with identical ownership, in the same geographic area and as a co-borrower is treated as a business expansion with no minimum injection. Neither is lender discretion. Individual lenders apply their own credit policy on top of all of this, and that policy is usually stricter.
Generated from the bound SOP 50 10 dataset and locked by golden tests.
Assumptions & Limitations
This tool assumes:
- SDE is annual and is the figure the listing headlines, already inclusive of the add-backs claimed.
- The share of add-backs you expect to be disallowed is your judgement, not a prediction this page makes. It is the single input most worth testing at several values.
- The salary you enter is drawn before debt service, which is how a lender models it.
- The loan is a single Standard 7(a) term loan amortising monthly at a fixed rate over the term entered.
- Total project cost is the purchase price plus working capital and closing costs, which is the base the equity injection is measured against.
- The seller note is treated as part of the project funding stack and not as debt the coverage test must also serve — full standby is assumed.
- The applicable SOP version is chosen by the first day of your expected closing month.
- The equity requirement is measured on the base the applicable rulebook names — total project cost in every case except an Owner Buyout under SOP 50 10 8.1, which SBA measures on the purchase price alone.
It does not cover:
- This models the SBA PROGRAMME RULES, not any lender's credit policy. Lenders overlay their own requirements, most commonly a coverage ratio of 1.25 or higher, and routinely lend less than the programme allows. A result of 'financeable' is not an approval.
- It does not model a seller note on partial standby, an interest-only period, a variable rate that moves with prime, an SBA Express or 7(a) Small loan, a 504 structure, or two loans used together.
- It does not test eligibility: size standards, the ownership and citizenship rules, franchise review, the credit elsewhere test and the personal guarantee requirements are all outside it.
- It does not value the business. A price under the ceiling is a price a lender will finance, which is a different question from whether the business is worth it.
- It does not model the SBA guaranty fee, the lender's packaging fee, or the effect of financing those costs into the loan beyond what you enter as closing costs.
- The equity injection rule applied is the change-of-ownership requirement. Other injection rules exist for other uses of proceeds and are not modelled.
- It is not lending, legal, tax or investment advice, and it is not a substitute for the diligence a quality of earnings review performs.
- It does not test the seller-note conditions SBA imposes when a note is counted towards the equity injection: full standby for the life of the SBA loan, and no more than half of the required injection.
- It does not flag the Quality of Earnings report SOP 50 10 8.1 requires on an Initial Acquisition or Business Expansion where the purchase price is $3,000,000 or more.
Frequently Asked Questions
How much can I borrow to buy a business with an SBA loan?
Not a fixed amount — an amount the business's own cash flow sets. SBA requires a debt service coverage ratio of at least 1.15, so the earnings a lender accepts, less the salary you will draw, divided by 1.15, is the largest annual debt service the deal can carry. Discount that over your term at your rate and you have the largest loan. A single Standard 7(a) loan also cannot exceed $5,000,000. Enter your figures above and this page runs that arithmetic backwards for you.
What debt service coverage ratio does the SBA require?
1.15 on a historical or projected cash flow basis, and 1:1 on a global basis, under both SOP 50 10 8 and 8.1. That is the programme floor. Most lenders overlay a higher figure of their own — 1.25 is common and 1.35 or 1.50 appears for first-time buyers — and the overlay costs real money: on a $1.2m deal, moving from 1.15 to 1.25 removes roughly $121,000 from the price the business supports. Ask each lender for their ratio before you ask for their rate.
How much do I have to put down on an SBA acquisition loan?
At least 10% of total project cost — the purchase price plus working capital plus closing costs, not the price alone. Under SOP 50 10 8 that applies to every complete change of ownership and the SOP gives the lender no discretion to reduce or eliminate it. From 1 October 2026, SOP 50 10 8.1 keeps 10% for all four transaction types but lets a lender reduce or eliminate it on a Business Expansion or an Owner Buyout where the borrower has sufficient liquidity and working capital, subject to conditions. On an Initial Acquisition it explicitly cannot be reduced. An Owner Buyout under 8.1 is also measured on the purchase price rather than total project cost. Separately, a seller note can count towards the injection only if it is on full standby for the life of the SBA loan and is no more than half of the required injection.
What changes on 1 October 2026?
SOP 50 10 8.1 takes effect and replaces version 8's single change-of-ownership equity rule with four transaction types: Initial Acquisition, Business Expansion, Owner Buyout, and ESOP or Cooperative. The 10% figure is unchanged in all four. The usual summary — that 8.1 takes away a lender's ability to reduce the injection — is backwards. Version 8 says SBA requires the 10% and never grants the lender discretion to reduce or eliminate it; the phrase does not occur in the document. 8.1 grants that discretion for the first time, and only for Business Expansions and Owner Buyouts. For a first-time buyer making an Initial Acquisition, 1 October changes nothing. 8.1 does move one thing in the buyer's favour on a partner buyout: the requirement is measured on the purchase price rather than on total project cost.
Why does the loan term cap at ten years?
Because SOP 50 10 limits the financing of intangible assets, including goodwill, to ten years, and on most small-business acquisitions the majority of the price is goodwill. It is the single biggest reason acquisition debt service looks heavy next to a mortgage: the same money over ten years instead of twenty-five. Real estate inside the deal can run to 25 years, but this page models one term loan and does not split the structure.
How much of the seller's add-backs will a lender actually accept?
There is no published figure, and anyone who quotes you one is guessing. It depends entirely on what the add-backs are: a genuinely non-recurring expense with documentation usually survives, an owner's personal spending usually survives, and a cost you will have to keep paying — a family member doing real work, deferred maintenance, an under-market rent from a related landlord — usually does not. That is why the share disallowed is an input here rather than an assumption. Run it at 0%, 20% and 40% and look at the spread; that spread is your diligence budget's return.
Is a seller note counted as debt for the coverage test?
It depends on the standby. A seller note on full standby for the life of the SBA loan can count towards the equity injection and does not have to be serviced, which is how this page models it. A note on partial standby, or one paying interest, is debt that the coverage test must serve, which this page does not model. If your structure has a seller note that pays, treat the result here as optimistic and ask your lender to run their version.
Does this mean my loan will be approved?
No. This models the SBA programme rules only. Approval also turns on eligibility — size standards, ownership and citizenship, franchise review, credit elsewhere — on the business valuation an independent appraiser produces, on your credit and industry experience, and on the individual lender's credit policy, which is stricter than the programme in almost every case. A price under the ceiling here is a price that is not immediately disqualified, which is a useful thing to know before signing a letter of intent and nothing more.
Evidence, sources and editorial review
SBA Business Acquisition Calculator: The Highest Price This Business Supports, and What the Seller Is Asking groups its evidence and methodology review here so sources, assumptions and responsibility can be checked together.
Methodology
Every programme rule comes from SBA SOP 50 10, bound as a provenance-tracked dataset the engine reads at run time rather than restating in code. Because SOP 50 10 8.1 takes effect on 1 October 2026 and changes the change-of-ownership equity rules, the pack holds both versions side by side with an effectiveFrom date and the engine selects the rulebook from your expected closing date, not from today's. The audit runs in three steps. First it removes the share of the seller's add-backs you expect diligence to disallow, giving the SDE a lender will underwrite, then subtracts the salary you intend to draw, because a buyer who forgets their own wage has modelled the deal wrong. Second it converts what is left into a ceiling: annual cash divided by the coverage ratio is the maximum debt service, that service discounted at the loan rate over the term is the maximum loan, and the loan grossed up for your equity and any seller note, less working capital and closing costs, is the maximum price. The coverage ratio defaults to the SBA floor of 1.15 and is an input, so a lender's own 1.25 or 1.50 overlay can be tested against it. Third it prices the asking figure the same way and reports the coverage ratio, the equity injection the applicable SOP version requires, the base that version measures it on, whether that requirement may be reduced, the ten-year cap on financing goodwill and the maximum rate for a loan of that size. All figures are locked by golden tests that run on each build.
Reviewed according to the CalcDomain Editorial Policy & Calculator Methodology. We document formulas, edge cases, sources, update dates, and correction paths for calculator pages.
If a rule or a source here is wrong, use the feedback control on this page. Corrections are made against the published SOP, the golden tests are updated in the same change, and the version history below records what moved.
Updated
References & Authoritative Sources
- U.S. Small Business Administration — SOP 50 10 8 — Lender and Development Company Loan Programs (effective 1 June 2025) · consulted August 28, 2026 · The rulebook for a deal closing before 1 October 2026. Source of the 1.15 coverage requirement, the $5,000,000 loan maximum, the ten-year limit on financing intangible assets including goodwill, and the 10% equity injection on a change of ownership, which this version requires without granting the lender discretion to reduce it.
- U.S. Small Business Administration — SOP 50 10 8.1 — Lender and Development Company Loan Programs (effective 1 October 2026) · consulted August 28, 2026 · The rulebook for a deal closing on or after 1 October 2026. It splits changes of ownership into four transaction types, states that on an Initial Acquisition the equity injection cannot be reduced or eliminated, grants the lender discretion to reduce or eliminate it on a Business Expansion or Owner Buyout, and measures an Owner Buyout's requirement on the purchase price rather than on total project cost.
- U.S. Small Business Administration — 7(a) loan program — terms, conditions and eligibility · consulted August 28, 2026 · The official programme pages behind the SOP.
- SBA — Office of Entrepreneurial Development — SBA district offices, SBDCs and SCORE · consulted August 28, 2026 · Free advisers who are not brokers and are not paid on the transaction closing.
Data Source
The bound SOP pack supplies every programme rule the engine applies — the 1.15 coverage floor, the $5,000,000 maximum on a single Standard 7(a) loan, the ten-year cap on financing goodwill, the maximum rate spreads over prime by loan size, and the change-of-ownership equity requirements with their reducibility and their measurement base, as they stand under SOP 50 10 8 and as they change under 8.1.
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Update history
Last updated .
| Date | Version | Change |
|---|---|---|
| 2026-08-28 | 1.0 | First release: coverage-ratio price ceiling read from the bound SOP pack, add-back haircut, equity injection, reducibility and equity base selected by expected closing date and transaction type across SOP 50 10 8 and 8.1, goodwill maturity cap, programme loan maximum and maximum rate spread by loan size |