How Much Business Can You Afford To Buy?
Enter your cash, any seller note or investors, and the business’s cash flow. We apply the two SBA rules that cap every acquisition, the 10% Down Payment and 1.25x debt coverage, and show you the highest price both allow, with the math.
The Two Rules That Set Your Price
Every SBA acquisition has to pass both. Whichever gives the lower price is your ceiling.
1. The 10% Down Payment
SBA requires a Down Payment of at least 10% of the total project cost on the purchase of a business: the price, plus any working capital, closing costs and fees in the loan. On a business purchase the lender cannot reduce or waive it.
2. Half Can Be Limited Sources
A seller note on full standby and money from investors who own under 20% are limited sources. Together they can cover up to half of the Down Payment. The other half comes from your own cash or from owners of 20% or more.
3. 1.25x Debt Coverage
The business’s cash flow, after a fair salary for whoever runs it, must cover all the loan payments at least 1.25 times. That caps the payment, and the payment caps the loan.
Example: $200,000 Cash And $600,000 Of Cash Flow
A buyer has $200,000 saved and is looking at businesses earning about $600,000 a year in SDE, with $150,000 set aside as the buyer’s salary.
- With no seller note, $200,000 is 10% of a $2,000,000 project, so the Down Payment rule caps the project at about $2,000,000.
- With a 5% seller note on full standby, the $200,000 only has to be half of the Down Payment, so the rule allows a project of about $4,000,000.
- Cash flow after salary is $450,000. Divided by 1.25, the business can carry up to $360,000 a year, or $30,000 a month, in loan payments.
- Enter your quoted rate above to turn that payment into a loan amount. Whichever limit is lower is the price to shop for.
The Down Payment Side Of The Example
| Your cash | $200,000 |
| Project with no seller note (10%) | $2,000,000 |
| Project with a 5% standby seller note | $4,000,000 |
| Seller note on that project (5% of the price) | About $200,000 |
| Most the seller note can count for | Half of the 10% |
Rounded. The guaranty fee, if financed, is part of the project, which trims the price slightly. The calculator does the exact math.
What Else Lenders Check
The calculator covers the two hard limits. These also shape the loan you get.
Business valuation
An independent valuation must support the price. If the price is higher, the gap comes from extra equity, not a bigger loan.
Quality of Earnings
At a business purchase price of $3 million or more, lenders need an independent Quality of Earnings report, and its earnings are the ones used for coverage.
Your experience
Lenders want to see that you can run this business, through industry or management experience and a sound transition plan.
Personal guaranties
Everyone who will own 20% or more of the buyer personally guarantees the loan.
The seller’s exit
The seller cannot stay as an owner or employee, but can consult for up to 24 months.
Above $5 million
One SBA loan caps at $5 million. Larger deals pair it with a conventional loan. See SBA pari passu loans.
Rules from SBA SOP 50 10 8.1, Appendix 15 (Changes of Ownership), effective for applications received on or after October 1, 2026. See how we finance these deals on our business acquisition loan page and in our closed deals.
Found A Business You Can Afford?
Send us the deal. We take it to the SBA lenders that fit from our network of 50+ and you pick the best offer. It costs you nothing.
Frequently Asked Questions
How much business can I afford to buy with an SBA loan?
Two limits decide it. Your Down Payment sources must cover at least 10% of the total project cost, and the business cash flow must cover the loan payments at least 1.25 times. The lower of the two prices is the most you can finance. This calculator works out both.
How much cash do I need to buy a business?
At least 5% of the total project cost from your own cash (or from owners of 20% or more), because the seller note and minority investors together can cover no more than half of the 10% Down Payment. Without a seller note on full standby, you need the full 10%.
Does a seller note count toward the Down Payment?
Only if it is on full standby, meaning no principal or interest payments for the life of the SBA loan, and only for up to half of the required Down Payment. A seller note with payments, or one on standby for only part of the term, does not count, and its payments must fit in the cash flow.
Can investors help with the Down Payment?
Yes. Investors who own less than 20% and do not control the business count as a limited source, which shares the half-of-the-Down-Payment cap with a standby seller note. Anyone who owns 20% or more must personally guarantee the loan, and their cash counts like yours.
What is SDE and why do lenders subtract a salary?
Seller’s Discretionary Earnings is profit before the owner’s pay, interest, depreciation and one-time items. Somebody still has to run the business, so lenders subtract a fair salary for you or a manager before they test whether cash flow covers the loan.
What happens if the business costs more than $5 million?
A single SBA 7(a) loan tops out at $5 million. Above that, lenders can pair the SBA loan with a conventional loan that shares the collateral equally, called pari passu. The 10% Down Payment is still measured on the whole project.
Why do I have to enter a rate?
The payment, and so the cash flow test, depends on the rate. Rates differ by lender, loan size and timing, so use the rate on a quote you have. We would rather you see your own numbers than a rate we picked.
Is this a loan approval?
No. It is an estimate under the SBA rules. Lenders also look at your experience, credit, the business valuation and the full financials. A pre-qualification letter from us is the next step before you make an offer.
Keep Planning Your Acquisition
Also see: Closed Deals · Top SBA Lenders · SBA Calculators · Pre-Qualification Letter
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