The 20-second answer
Your max price is the lower of two numbers: (1) down payment ÷ equity % $150,000 at 10% down supports a $1.5M price; and (2) the price whose loan the cash flow can cover at your target DSCR. Take the smaller. Buying above it means either you can't fund the down payment or the business can't carry the debt.
The two ceilings, and why the lower one wins
Ceiling 1, your equity. SBA 7(a) acquisition loans require at least a 10% equity injection. If you have $150,000 in cash, 10% down caps you at a $1.5M price. Bring more cash, or a seller note on standby that counts toward injection, and this ceiling rises.
Ceiling 2, the cash flow. The business has to pay its own loan. We take its cash flow, subtract the salary you need to live on, divide by your target DSCR to get the maximum safe annual payment, and back into the biggest loan that payment supports at your rate and term. Add your down payment and that's the cash-flow ceiling.
You can only close a deal that clears both. That's why the calculator returns the smaller number, and tells you which one is holding you back, so you know whether to save more cash or hunt for a business with stronger earnings.
The math, worked
- Cash flow for debt = SDE − your salary draw
- Max annual debt service = cash-flow-for-debt ÷ target DSCR
- Max loan = present value of that payment at your rate & term
- Cash-flow ceiling = max loan ÷ (1 − equity %)
- Equity ceiling = down-payment cash ÷ equity %
- Max price = the lower of the two.
Don't forget the cash beyond the down payment
Your equity injection isn't the only cash you need. Budget for quality of earnings, legal, and, criticallyworking capital. Many first-timers get approved and then get squeezed in month two because they spent every dollar on the down payment.
How to raise your ceiling
- Longer term (real estate → 25 years) lifts the cash-flow ceiling by shrinking the payment.
- Seller note on standby can count toward the 10% injection, stretching a small down payment further.
- A stronger business higher, cleaner SDE, raises the debt the deal can carry.
- Investor equity adds to your down-payment cash without a bank loan.
See how a real capital stack fits together
Purchase price, 10% injection, seller note, working capital, the full SBA acquisition structure.
Frequently asked questions
The lower of your down-payment ceiling (cash ÷ equity %) and your cash-flow ceiling (the price whose loan the business can service at your target DSCR). The calculator above returns that number and flags which limit binds.
SBA 7(a) requires a minimum 10% equity injection. Part can sometimes come from a seller note on full standby. Budget extra beyond the down payment for closing costs and working capital.
Yes, under SBA rules a seller note on full standby for the life of the loan can count toward the required equity injection, which can cut the cash you personally bring. See seller notes on standby.
Educational planning tool only, not a loan offer or financial advice. Your real ceiling depends on lender underwriting, credit, and the specific business.
