What are you most curious about when it comes to SBA lending?

July 29, 2025

by a lender from The University of Mississippi - School of Business Administration in Saint Louis, MO, USA

Hello All, I recently joined the group and would like to provide meaningful content to you all. I'm interested to hear what questions you have about SBA lending. I plan to use your feedback as a guide for future posts...fire away!

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Reply by a searcher
from University of Louisville in St. Louis, MO, USA

Thanks for offering. Seller financing and other creative financing aside, do you mainly see only lower SDE multiples working with SBA financing? By "lower," I mean the 1-3 range. The reason I ask is because when I do the math on a 12.5% 10-year, 10% down SBA loan, a multiple of 5 can't service the debt. My simple math is below. If I'm missing something, please let me know. $1,000,000 business price $900,000 loan amount 12.5% rate 10-year loan term $13,173 monthly payment At a 5 multiple (SDE to Price) = $200,000 Meaning I'd take home before taxes = $41,924 Taxes vary, but a simple estimate puts you above = $45,000 in taxes So, real take-home would be = -$4,000 for 10 years

Reply by a searcher
from Purdue University in Phoenix, AZ, USA

You are correct. Above 3-3.5x a straight SBA loan doesn't work. You have to creatively structure and hope the broker representing the seller is experienced enough to inform them of how the world works. Examples would be an earn-out, larger seller-carry, or keeping the seller onboard some %, or finding outside investors. Realistically the businesses that are run well enough to truly command 4x to 5x and above are snatched up by private equity. (Translation - they get locked up at 5x by PE who have a big legal budget, PE drags out the process then lowballs them with big earn outs after months of back and forth, the seller signs, the earn outs are impossible and they end up walking away with 3.5x. But I digress.) Unsophisticated sellers often just expect you to throw down 20% or 30% cash out of pocket to make the multiples work. That doesn't fly because most buyers don't have that kind of cash and your cash on cash ROI is dramatically reduced so it's unattractive. Besides, the good deals never even make it to bizbuysell.

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