SBA loan calculator for buying a business
By Josh Elberg, founder of Palavir · Published
Palavir is a Michigan data and automation consultancy.
Short answer, with the starting numbers (change them below)
On a $600,000 business with $200,427 of seller-stated profit, the middle of our main-range listings, a 10% equity SBA loan of $621,000 over 10 years at 10% costs about $98,000 a year. After you take $60,000 for yourself, coverage is 1.43x, above the 1.25x the SBA asks for. If profit comes in 30% lower, it falls to 0.82x.
Of 1,809 US businesses for sale with a clear asking price and profit (Palavir data, 2026-10-28), 89% show seller-stated profit of at least 1.25 times the payments on an assumed loan of 90% of the price over 10 years at 10%. That is a rough test before the owner is paid; a lender's test is stricter.
The business
Digits or a short form like 600k. Starts at the middle main-range listing in our data.
The seller's own figure, often SDE (it includes the owner's pay).
Or a manager's salary. $60,000 is an illustration, not a market figure.
Change the loan, your cash and the seller note
15% is a Palavir assumption. Your lender sets the real figure.
10% of the total project is the SBA minimum for buying a business (SOP 50 10 8.1).
Assumed, not a lender quote.
Assumed. Ten years is common for a business without real estate.
Part of the price you pay the seller over time. 0 means none.
No payments of any kind until the SBA loan is paid off. Only then can it count toward your 10%, and for no more than half of it.
Assumed. Set by you and the seller.
Assumed. Used once the note starts paying.
The result
- Total project $690,000: price plus $90,000 for stock, closing costs and working cash.
- Equity 10.0% of the project. Meets the 10% minimum
- Profit left for the loan after your pay: $140,427. Before your pay, coverage is 2.04x.
- If profit comes in 30% lower than the seller says, coverage falls to 0.82x.
Estimates from your own inputs. Not a lender quote, not advice, and not for submission to a lender. A lender tests coverage on EBITDA and all the debt after the purchase, and checks that enough is left to pay you.
Have a listing in front of you? Check it free.
What the calculator checks
- Coverage. Profit left after your own pay, divided by the yearly payments on the SBA loan and any paying seller note. The SBA asks for at least 1.25 for buying a business.
- Equity. Your cash, plus the part of a full-standby seller note the SBA lets count, as a share of the total project. The minimum is 10%.
- Highest price. The price at which the same profit gives exactly 1.25x on the same terms. It counts a standby note's payments too, so it still holds once the note starts paying.
- Lower profit. The same coverage if profit is 30% below the seller's figure, because the seller's figure is their own.
The full rules are in SBA loan down payment and DSCR. If the profit in a listing is SDE, read SDE vs EBITDA before you trust the coverage figure.
Questions people ask
How do I calculate DSCR for an SBA loan to buy a business?
Divide the yearly cash the business earns by its yearly debt payments after the purchase. For buying a business (an Initial Acquisition), SBA SOP 50 10 8.1 asks for at least 1.25. A lender uses EBITDA, all the debt after the purchase including a paying seller note, and the last fiscal year or the average of the last two, and checks that enough is left to pay the owner. This calculator takes your own pay out first, so its figure is closer to what is left once you are paid.
How much down payment does an SBA loan need to buy a business?
At least 10% of the total project cost, which is the price plus stock, closing costs and working capital, not 10% of the price alone. For an Initial Acquisition the SBA rulebook says it cannot be reduced. With the calculator's starting numbers that is $69,000 on a $690,000 project.
Can a seller note count toward the 10%?
Yes, partly. A seller note counts only if it is subordinated to the lender and on full standby, which means no payments of principal or interest for the term of the SBA loan, and it can cover no more than half of the 10%. A seller note that is paid along the way adds to the yearly payments and does not count toward the 10%.
Is this a loan quote?
No. The rate, the loan length and the 15% for stock and closing costs are assumptions you can change. A lender sets the real terms and tests the business's own records, not the seller's summary.
Sources
- Rules: SBA Standard Operating Procedure 50 10 8.1, effective October 1, 2026. Initial Acquisition: equity of at least 10% of the total project cost, debt service coverage of at least 1.25:1, seller debt toward equity only on full standby and for no more than half. Read October 2026.
- Starting price and profit: the middle of 949 clean US listings asking $250,000 to under $2,000,000 in Palavir Deal Scout data (2026-10-28). Asking prices and seller-stated profit, not sale results.
- Loan rate, loan length, the 15% for stock and closing costs, the seller note terms and the $60,000 pay are Palavir assumptions, not a lender quote.
Before income tax. Not financial advice, and not for submission to a lender.