Rising multiples and SBA affordability?

August 13, 2025

by a searcher from Harvard University - Harvard Business School in Washington, DC, USA

Serious question -- How are SBA-backed self-funded principals making deals happen with the current multiple expectations? My understanding - based on the math - is that if you're using the standard###-###-#### or some close variation of that formula, the most you can afford to pay is ~4x (4.25x stretched) EBITDA. Yet, I'm frequently talking to people saying they have offers of 5-6x, and if I'm not offering at least 4.5x, I should not waste my time submitting an IoI. Yes, they may be bluffing, but they do feel like honest conversations as opposed to posturing. I'm also referring to sub-$1M deals, so not businesses that are incredibly large. However, I have not been looking at business segments like HVAC, contractors etc. (maybe its different in that space?) Am I just looking at the wrong deals/talking to the wrong people? How are people in similar situations able to get deals done? Or is the reality that you CAN'T get deals done in this market as a self funded searcher using SBA debt, and that you should either plan on investors willing to fund a large chunk of equity, or go home? I'd appreciate any insight. I'm seriously wondering what I'm doing wrong, and tired of not getting any results. Posting anonymously since I don't want to lose any established credibility with brokers on this site thinking I can't make a deal happen.

Reply by an investor
from New York University in New York, NY, USA

From the view of an investor in self-funded search deals - there are numerous levers that can be pulled. First off - I know asking price multiples have gone up, but I am seeing some deals under LOI at reasonable multiples. I recently invested in a home services deal with ~$800k of Adj EBITDA that was acquired for under 4x. I am currently looking at 2 deals in the $1.0-1.5mm Adj EBITDA range that are under LOI for ~4.5x. I’m also looking at 2 that are in the $600-700k range that are under LOI for < 4.0x. I think you can make the numbers work at 4.5x, perhaps slightly higher - you just need to be flexible. Your starting point is getting the DSCR in a good position for the SBA loan. You can’t control the SBA, but you can certainly push on the seller note terms. I’m seeing a lot of seller notes with 2 years IO or full standby, and then 3 years of amort, or even worse a balloon payment after 5 years - instead, I suggest you push for 5 years of amort. I am actually looking at a deal right now with a 10% seller note and 14 years full standby as the deal includes real estate as well (not a typo - no clue how he got that term). Sellers are typically focused on cash at close and the headline sale price - getting the seller note repaid in 5 years vs. 7-8 years is likely not a huge deal but will help your DSCR. Then you need to think about how much equity you are going to raise. If you have a good deal that is well-structured and well-presented, you can certainly raise the equity - there is plenty of money out there looking to fund self-funded search deals. Personally I’m not a fan of just 10% equity - I’d prefer that the searcher raise more than is required so there is cash on the balance sheet in case issues arise (and they will). Shifting more into equity and less into debt is obviously going to help your DSCR, but will hurt your investor IRRs. To keep your equity investors engaged, you should consider raising the step-up. Yes, that takes equity away from you, but it also makes the deal more conservative, which is a benefit to you since you are the one putting the PG. And obviously you are better off owning 70% of a closed deal than 80% of nothing. Anyway, I know it’s tough out there - some sectors are overheating and there are more searchers competing for what seems like a finite pool of deals. At some point, the tide will turn. But there are deals getting done today - just stay at it, make sure you are looking at enough deals and be ready to move quickly. If you’d like to chat, feel free to DM me or you can email me directly at redacted

Reply by a searcher
from University of Texas at Austin in Dallas, TX, USA

5-6x on a sub-$1m deal is ludicrous. Wishful thinking from the seller. Only structure that would work would be some sort of contingent seller note or earnout. Otherwise stay away imo

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