≈ $50,000 down
Estimated total
$2,699/mo
Since buying a business is usually financed, your estimate turns the purchase price, down payment, interest rate, and loan term you enter into a monthly payment - then weighs that against your income to gauge how risky it would be.
These key factors affect business purchase affordability
SBA financing structure
Most business acquisitions under $5 million are financed through an SBA 7(a) loan, which typically requires a 10-20% down payment from the buyer, matching the 20% assumed here, with rates often running prime plus 2.25%-4.75% - the 8% used in this estimate is a reasonable current-rate assumption.
Seller's discretionary earnings drive the real affordability test
Lenders and reasonable buyers price a business off its cash flow, known as seller's discretionary earnings, not just its assets, and generally want the business to generate enough SDE to cover the loan payment plus a reasonable owner salary with a debt-service coverage ratio of at least 1.15-1.25x.
Working capital beyond the purchase price
Closing costs, due diligence fees for accountants and attorneys, and working capital to cover payroll and expenses during the ownership transition typically add another 10-15% on top of the purchase price, so buyers need to budget beyond just the loan payment itself.
How to use your results
- Look at the monthly payment next to the business's actual cash flow, not just your personal income, since the business is meant to service its own debt.
- If the risk bar is high, try increasing your down payment percentage or extending the loan term - this calculator supports 7, 10, or 15 years - to see how much it lowers the monthly payment.
- Remember this payment doesn't include working capital, due diligence costs, or a transition period where revenue may dip, so budget separately for those.
Ways to lower your monthly payment on this business purchase
- Increase your down payment beyond the 20% default if you can, since a larger equity injection lowers both the loan amount and the interest rate lenders offer.
- Look into SBA 7(a) financing, which often offers longer terms and lower down payment requirements than a conventional acquisition loan.
- Negotiate seller financing for a portion of the purchase price, which reduces how much you need to borrow from a bank and may come with more flexible terms.
- Choose a longer loan term if cash flow is tight in the early years, even though it increases total interest paid, to keep the monthly payment manageable while the business stabilizes.
More career & life changes calculators
Nothing added yet - add something to see your risk.