Does the deal cash flow?
Model it before you sign anything.
Every acquisition comes down to one question a lender, a seller and a buyer each answer differently: after the debt and the rent, what is left? This runs the whole chain. Earnings, a multiple that scales with the size of the business, SBA and seller note debt service, leasing against buying the building, and ten years of what lands in your account.
Free and open. Nothing is asked for until you want the written deal memo.
The business
What it earns, and for whom.
A buyer's lender accepts the add-backs it can trace to a document. Anything you cannot show gets stripped in diligence, and the price moves with it.
The price
A multiple of earnings, or the number on the listing.
Financing
Who puts up what, and on what terms.
The building
Keep paying rent, or buy it with the business.
Illustrative, pre-tax and before any salary you pay yourself. Multiples are 2025 closed-deal bands by industry, scaled for size on the IBBA and M&A Source Market Pulse curve. SBA payments assume a ten-year fully amortizing 7(a) note and the standard guaranty fee schedule; lenders quote the actual terms. Nothing here is a valuation or a loan commitment.
Get the written deal memoFrom the top line to your account.
Every dollar of revenue, in the order it leaves. The chart redraws as you change the model above.
Year one waterfall
Revenue to owner cash, annualCash to you, by year
Ten years with the debt, then the first year without itDebt outstanding
Balance at year end| Year | Revenue | SDE before rent | Occupancy | Debt service | DSCR | Cash to you | Cumulative |
|---|
| Year | Payment | Principal | Interest | Balance |
|---|
Coverage against price and rate.
Each cell is year-one debt service coverage with everything else left as you set it. Across the top, the multiple of SDE you pay, a quarter turn apart. Down the side, the SBA rate, half a point apart. The outlined cell is the deal as modeled, so one step left is paying a quarter turn less, one step down is the rate rising half a point. Lenders look for 1.25× or better.
The building, both ways.
Same business, same acquisition debt. One version keeps paying rent with the escalator you set; the other buys the property on the terms in step four.
Lease
Buy
Ten-year position is cumulative cash to you, plus equity built in the property through the down payment, principal paid and appreciation, less cash to close. Selling costs on the property and taxes are excluded.
The same numbers,
written up for a lender.
Sources and uses, the earnings bridge, the debt schedule and the ten-year view on one page. Leave your details and it unlocks here, and the figures come to us so the reply is about this deal.
Unlock the deal memo
Your model, written up and printable. We will read it before we call.
Your figures come with it. Nothing is shared, and no engagement comes out of it.
acquisition at
| Year | SDE before rent | Occupancy | SBA | Seller note | Property | DSCR | Cash to you |
|---|
Prepared from figures entered on nolanscottteam.com/cash-flow-calculator. Illustrative, pre-tax, before any owner salary, and not a valuation, an offer or a loan commitment. The Nolan Scott Team, brokered by eXp Commercial. 404-247-5880.
The order a lender runs it in.
Seller's discretionary earnings is net income with the owner's salary, perks, interest, depreciation, amortization and non-recurring costs added back. Enter it directly if the broker has already recast the books, or build it line by line and see which add-backs carry the number. Rent is tracked on its own because the occupancy step can change it.
Each industry carries a band from BizBuySell's 2025 closed transactions: floor at eighty percent of the average, ceiling at a hundred and thirty-five percent. The band is set at $500K of SDE and moves on a logarithmic size curve anchored to IBBA Market Pulse medians, so a $2M earner is priced on a higher multiple than a $300K one. Or type the asking price and read the implied multiple against the band.
Coverage here is SDE, adjusted for the new rent or the carrying cost of the building, divided by the year's payments on the SBA note, the seller note and any property loan. Everything after the debt is yours, and what you pay yourself out of it is your call. A lender runs the same test after deducting a salary for you, so its ratio will be lower than this one. Most SBA lenders want 1.25× on that basis.
What buyers ask when
the number comes back.
What is SDE, and why does the price key off it?
Seller's discretionary earnings is the total financial benefit one working owner takes from the business in a year: net profit, plus the owner's salary and perks, plus interest, depreciation and amortization, plus expenses that will not recur. Main street and lower middle market businesses are priced as a multiple of that figure because it is what a buyer who steps into the owner's chair actually receives. Above roughly two million dollars of value the market shifts to EBITDA, which deducts a market salary for the owner first and is therefore a smaller number carrying a larger multiple.
Why does the multiple move when I change the earnings?
Because buyers pay more per dollar of earnings for a larger business. IBBA and M&A Source Market Pulse medians run from about two times for businesses under five hundred thousand dollars of value to about four times from two to five million. The calculator anchors each industry band at five hundred thousand dollars of SDE and moves it on a logarithmic curve from there, so the multiple rises smoothly with size rather than jumping at a threshold.
How does a lender compute debt service coverage?
The lender starts from the earnings, deducts a reasonable salary for the new owner because someone has to run the business, and compares what is left with the total annual payments on the acquisition debt. Most SBA lenders want that ratio at 1.25 or better on the trailing year. The calculator shows coverage before any owner salary, because what you pay yourself is your decision, so a lender's figure for the same deal will be lower. Take the cash after debt, subtract the salary you need, and divide by the debt service to see it the lender's way.
Should I buy the building or lease it?
The calculator runs both and shows them side by side. Leasing keeps the cash to close lower and leaves the renewal risk with you. Buying adds a down payment and a second loan, usually on a longer term, and replaces rent with a mortgage payment and carrying costs while building equity in the property. On an SBA 7(a) loan, real estate in the deal can extend the term, which lowers the monthly payment. Which one wins depends on the rent the seller is charging against what the building would cost to carry, and the ten-year comparison is built to answer exactly that.
Does a seller note count toward my equity injection?
Only under conditions. Under SOP 50 10 8 a seller note can cover no more than half of the required injection, and only if it is on full standby for the life of the SBA loan, with no principal or interest paid until the bank is repaid. A note that is paid from day one, or after a two-year standby, still reduces the bank loan, but the full injection has to come from the buyer. The calculator lets you set the standby either way and shows the payments when they start.
The spreadsheet is the easy part.
Finding the business that fits it is ours.
Forty minutes on the deal you modeled, what you can finance, and whether the businesses you have been sent deserve your diligence budget. No engagement comes out of it.