Calculate How Much Business You Can Buy

Your affordability ceiling is driven by two things you control: the cash you can put down and how leveraged you're willing to be. The math is simply Max Price = Cash ÷ Down %. Put $150,000 down at 15%, for example, and you can support a business priced up to about $1,000,000.

Leverage cuts both ways - a smaller down payment stretches your cash further, but it also means a bigger loan — and more annual debt service — to cover.

Affording the price is only half the picture — the business also has to earn enough to pay you and cover the loan. The Min Business Cash Flow is the least annual cash flow (SDE) a target business must generate for the deal to work: Salary + (1.35 × Annual Debt Service).

Use it as a screening filter. If a listing's SDE is below this number, the deal likely won't support both your salary and the loan payments at that price.

Total Owner Cash Flow is what you'd actually take home in a year if a business performed right at the Min Business Cash Flow. It has two parts: the salary you set for yourself, plus the excess SDE — the cushion that's left after your salary and the loan payments are covered. In short: Total Owner Cash Flow = Excess SDE + Owner Salary.

Because the calculator builds in a 1.35× coverage cushion, a qualifying business always throws off a bit more cash than it strictly needs to pay you and service the debt. That surplus is yours — to reinvest, save, or draw on top of your salary — so your real earning potential is higher than the salary figure alone suggests.

Seller's Discretionary Earnings (SDE) is the total financial benefit a single owner-operator receives from a business in a year. It starts with net profit, then adds back the owner's salary, discretionary perks, interest, taxes, depreciation, and other one-time or non-operational expenses.

Because it reflects the full cash flow available to a new owner, SDE — not reported net profit — is the standard basis for pricing and financing small business acquisitions.

It's not a lower down payment, just a lower percentage down. Your cash is the numerator; the down-payment percentage is the denominator. The smaller that percentage, the larger the price your fixed cash can cover. At 10% down, $150,000 supports a $1.5M business; at 30% down, the same cash supports only $500,000.

The trade-off is risk: a bigger loan means more annual debt service and a thinner margin for error if the business underperforms. That's the "risk tolerance" the slider is asking you to weigh.

10% down is generally the minimum for an SBA 7(a) acquisition loan. In certain deals, part of that equity can be met with standby seller financing — a seller note the seller agrees not to collect on for a period of time — which can reduce your out-of-pocket cash to 5% or less.

That structure is the exception, not the rule. It requires a willing seller and a lender's approval, so treat sub-10% scenarios as best-case planning rather than a safe assumption.

Lenders don't want a business that earns exactly enough to cover its loan — they want a margin of safety. The Debt Service Coverage Ratio (DSCR) measures that margin, and the SBA minimum DSCR is 1.25, though most SBA lenders look for at least 1.35×, meaning cash flow (after your salary) covers the loan payment 1.35 times over.

This calculator bakes that 1.35× directly into the Min Business Cash Flow, so the figure you see already reflects what a lender would want the business to earn — not just the bare minimum to break even.

Most small businesses sell for roughly 2× to 4× SDE, though the right multiple varies widely by industry, size, growth, and how much the business depends on the owner. The Implied SDE Multiple shown here is what you'd be paying if a business earned exactly the minimum cash flow at your chosen price.

If that implied multiple sits well above the typical range for the industry you're targeting, it's a signal the deal may be a stretch — you'd either need to negotiate the price down or find a business that earns more.

No. This is an educational estimating tool to help you focus your search and understand the relationship between your cash, your income needs, and deal size. It is not a lending offer, a pre-approval, or personalized financial advice.

Actual loan terms, rates, and qualification requirements vary by lender and borrower. Always confirm the specifics with a qualified SBA lender and your own financial and legal advisors before making an offer.