Illustrative worked example
Buyer cash supported the target, but business cash flow did not
Policy update: SBA SOP 50 10 8.1 took effect October 1, 2026. This guidance was reviewed before that change and is due for review. Confirm current transaction requirements with your lender and the official SBA SOP.
A buyer had enough liquidity for a 10% injection on a $1.5 million acquisition, but the target's historical cash flow did not support the proposed senior debt at the planning DSCR.
Transparent methodologyPolicy as of 2026-08-15Preliminary, not a loan approval
Important: These are illustrative, anonymized worked examples created to explain the methodology. They are not actual client transactions, loan approvals, lender quotes, or predictions of outcome.
Inputs and transparent calculation
| Purchase Price | $1,500,000 |
|---|---|
| Buyer Cash | $180,000 |
| Eligible Annual Cash Flow | $240,000 |
| Seller Note | $0 |
| Annual Rate Pct | 10.5% |
| Term Years | 10 |
| Planning Dscr | 1.25x |
| Modeled senior loan | $1,320,000 |
| Modeled annual senior debt service | $213,737 |
| Modeled DSCR | 1.12x |
Financeability read
What controlled the result
Equity was not the binding constraint. At the modeled terms, the proposed $1.35 million senior loan produced approximately 1.10x DSCR. A planning-level senior-loan ceiling near $1.19 million implied a lower price, more qualifying equity, or a different structure.
Next diligence steps
- Reconcile eligible historical cash flow and add-backs.
- Negotiate price or add non-amortizing capital that the lender accepts.
- Preserve post-close liquidity rather than using all buyer cash to bridge the gap.
Authored and reviewed by Emporio Partners
Historical policy basis: SBA SOP 50 10 version 8, effective 2025-06-01. Version 8.1 took effect 2026-10-01; this guidance has not yet been substantively reviewed against that update.
Primary policy source
Educational planning guidance only. Emporio Partners is not a lender and does not issue approvals, pre-approvals, commitments, or guarantees. Lenders determine eligibility, eligible cash flow, structure, terms, and approval.
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