Can the earnings carry the price and the loan?
Put the price, the financing, and what the business earns in one place, and see the three things that decide it: the cash to close, whether the earnings cover the loan, and what you make on the money you put in. A self-assessment of the numbers, not advice on whether to buy.
The purchase
The financing
What it earns, and what you need
After paying you $75,000, the business covers the loan 1.01x over. That is below the 1.25x most lenders look for, and lenders often answer a gap like this with a bigger down payment, a lower price or a seller note.
- Cash to close
- $90,000
- Loan payment / yr
- $74,385
- Coverage after salary (lender’s view)
- 1.01x
- Coverage before salary (listing’s view)
- 2.02x
$500,000 is 3.3x the stated SDE, inside the usual 2.0-3.5x for a Main Street business.
| As stated | SDE 20% lower | |
|---|---|---|
| Annual SDE | $150,000 | $120,000 |
| Left after debt and salary | $615 | -$29,385 |
| Coverage after salary | 1.01x | 0.60x |
| Cash-on-cash | 0.7% | -32.7% |
A seller’s SDE is usually the best year with every add-back allowed. If the right-hand column does not work, the deal carries that risk, and buyers often address it with a lower price, a seller note or an earn-out.
A self-assessment estimate, not financing, investment or legal advice. Verify the seller’s SDE in diligence and review any offer with a qualified financial adviser, your lender and an attorney. Size the loan in the SBA calculator →