Illustrative worked example
A compliant standby seller note improved both injection and DSCR
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 $1.3 million acquisition was initially too tight with only 5% buyer cash. A seller note equal to the remaining 5% was modeled as equity credit only because it was assumed to be on full standby for the life of the SBA loan.
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 | $1,300,000 |
|---|---|
| Buyer Cash | $65,000 |
| Eligible Annual Cash Flow | $240,000 |
| Seller Note | $65,000 |
| Seller Note Full Standby Life Of Loan | Yes |
| Annual Rate Pct | 10.5% |
| Term Years | 10 |
| Planning Dscr | 1.25x |
| Modeled senior loan | $1,170,000 |
| Modeled annual senior debt service | $189,449 |
| Modeled DSCR | 1.27x |
Financeability read
What controlled the result
The modeled $1.17 million senior loan produced approximately 1.27x DSCR. The seller note represented half of the assumed 10% required injection and was not assigned current payments. Final equity credit and note terms remain lender determinations.
Next diligence steps
- Confirm total project cost, not only purchase price.
- Document buyer cash and the source of funds.
- Obtain lender and counsel approval of the standby and subordination documents.
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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