Illustrative worked example
Buyer cash supported the target, but business cash flow did not
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
Policy basis: SBA SOP 50 10 version 8, effective 2025-06-01. Version 8.1 is published for 2026-10-01 and is not treated as current policy before that date.
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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