Illustrative worked example
A compliant standby seller note improved both injection and DSCR
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
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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