How a business purchase is usually financed
Most small business acquisitions combine three pieces: the buyer's down payment, an acquisition loan (often an SBA 7(a) loan, which can be used for changes of ownership), and sometimes a seller note, where the seller lets you pay part of the price over time. Enter each piece to see the total payment and whether the business's cash flow can cover it.
Why DSCR matters
Lenders compare the business's cash flow with the total debt payments. This is the debt service coverage ratio (DSCR). Many lenders look for about 1.25x or more, meaning cash flow is at least 25% higher than the payments. If the calculator shows a lower number, try a larger down payment, a longer term, a bigger seller note, or a lower price.
Worked example
A $750,000 business bought with 10% down and a 10% seller note leaves a $600,000 acquisition loan. At an example rate of 10.5% over 10 years, the loan payment is about $8,096 a month. The $75,000 seller note at 6% over 5 years adds about $1,450. Total debt service is about $114,553 a year, so $220,000 of cash flow gives a DSCR of about 1.92x.
Before you make an offer
- Get at least three years of tax returns and financial statements, and check that cash flow is real and repeatable.
- Subtract a fair salary for yourself from the cash flow before you use it in the calculator.
- Ask your lender how much down payment is required and whether a seller note can count toward it. SBA rules on seller notes and equity changed in 2025, so confirm the current requirements.
- Budget for working capital after closing; the purchase price is not the only cash you need.
For the full process, read our guide to getting a loan to buy a business, and compare programs on the SBA loans page.
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Frequently asked questions
How do I calculate a business acquisition loan payment?
Subtract your down payment and any seller note from the purchase price to get the loan amount, then apply the rate and term. Add the seller note payment to get your total monthly debt payment.
How much down payment do I need to buy a business?
It depends on the lender, the deal, and the program. SBA-backed acquisitions commonly involve a down payment around 10% or more. Ask your lender about current SBA equity rules, including when a seller note can count.
What DSCR do lenders want for a business acquisition?
Many lenders look for about 1.25x or higher. Some want more for riskier industries or when the buyer has less experience.
Can I use an SBA loan to buy a business?
Yes. SBA 7(a) loans can be used for changes of ownership, up to $5 million. Terms are usually up to 10 years, or longer when real estate is included.
What is a seller note?
A seller note is a loan from the seller to the buyer for part of the purchase price, repaid over time. It reduces the cash and bank financing you need, and lenders may treat it differently depending on its terms.
Sources
- 7(a) loans, U.S. Small Business Administration
- 7(a) loan program terms, conditions, and eligibility, U.S. Small Business Administration
Disclaimer: This calculator is for educational and comparison purposes only and does not constitute a loan offer, financial advice, tax advice, or a guarantee of terms. Example values are illustrations, not quotes. SmallByzLoans is a funding marketplace, not a lender or financial advisor.