≈ $50,000 down
Estimated total
$2,699/mo
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By Alex Diaz · How we calculate this
Most acquisitions under $5 million get financed through an SBA 7(a) loan, and a common capital stack looks like 10% cash from the buyer, a 10% note carried by the seller, and the remaining 80% from a bank under the SBA guarantee. Because goodwill, not hard assets, makes up most of the value in a typical small business sale, SBA rules cap the loan term at 10 years for those deals, even though the same program allows up to 25 years when real estate backs the loan. Enter your purchase price, down payment, rate, and term and the estimate turns them into a monthly payment, then checks that number against your income.
These key factors affect business purchase affordability
SBA financing structure
An SBA 7(a) loan carries a variable rate, typically prime plus 2.25 to 4.75 percentage points depending on loan size and term, and the bank underwrites it against the target company's cash flow rather than your personal balance sheet. If a seller carries part of the price as a note, the SBA generally requires that note to sit on full standby, no principal or interest paid to the seller, for at least the first two years of the loan, or the guarantee gets reduced. That standby period is easy to overlook when you're first modeling a deal, and it changes how much cash the seller actually sees up front.
Seller's discretionary earnings drive the real affordability test
Buyers and lenders price a small business off seller's discretionary earnings, the true cash an owner pulls out after adding back their own salary, one-time costs, and non-cash charges, not the revenue multiple a seller might quote first. Lenders typically want SDE to cover the loan payment plus a market-rate manager's salary with room left over, roughly a 1.15 to 1.25x debt-service coverage ratio. Some deals bridge a valuation gap with an earnout instead, paying part of the price later out of future profits if the business hits agreed targets, which lowers what you finance upfront but ties part of your return to performance you won't fully control.
Working capital beyond the purchase price
The loan payment is rarely the full bill. Closing costs, due diligence work from your accountant and attorney, and working capital to cover payroll and vendor terms during the ownership transition commonly add another 10 to 15% on top of the purchase price. Underfunding that cushion is one of the more common ways a buyer runs short of cash in the first six months, even when the loan itself was priced correctly.
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.
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Sources
U.S. Small Business Administration (typical small-business loan rate)
Starting points to compare against, not real-time quotes.
Peer comparison data
Bureau of Labor Statistics (median income by age), Experian (credit score by age)
Used by the “how you compare” figures in the sidebar, not by the costs on this page.
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