How a small-business price gets paid

This is educational. It is not a credit decision and not legal, tax, or financial advice.

A price on a main-street company is usually several checks, not one. Buyer cash is money the buyer brings to closing. An SBA 7(a) loan, when a lender makes one, is the agency's primary loan program and can be used to buy a business. The current maximum, guarantee, and eligible uses are on sba.gov. A seller note is the seller's own loan to the buyer. An equity roll is a slice of the company the seller keeps instead of cash. An earnout is extra money that depends on what the business does after closing. It is contingent, so the model on this site leaves it out of the loan and out of debt service.

SBA's current rulebook for lenders is SOP 50 10, Lender and Development Company Loan Programs. Equity injection, what kind of standby note can count, collateral, and guarantee fees are in that SOP. The calculator does not apply it. A planning conversation often starts near 10 percent of project cost because a 2023 SBA procedural notice for SOP 50 10 7.1 described a 10 percent minimum equity injection for a complete change of ownership, and limits on when seller debt counts. That notice is not a substitute for the SOP in force on the day you apply. Read the current document, then ask the lender.

The same 2023 notice said seller earnouts were prohibited on 7(a) change-of-ownership loans, and described buyer rebates differently. Later SOP versions can change that sentence. This site will not tell you an earnout is allowed inside a 7(a) loan. It keeps the earnout out of the loan amount so the sources you type still add up to the price.

Standby is a period when the seller note does not require a full payment. Interest-only and no payment are the two modes in the model. After standby, a real note amortizes the way the note is written. The model uses a fully amortizing payment on the original amount as a fully loaded case, and shows year-one debt service separately.

Cash the seller receives at closing is the price minus the equity roll, the earnout, and the seller note. Those three are not wire transfers on closing day.

A debt-service coverage ratio under 1.25 is flagged because many lenders screen in that neighborhood. It is not a statute. SCORE mentors and an America's SBDC advisor can help you find a human to pressure-test the structure. They do not approve the loan.