SBA DSCR calculator
Does the business cover its loan on the lender's basis? Type the listing's numbers; the calculator takes out a market salary, maintenance capital and working capital, and tests what is left against the 1.25× floor.
The listing's numbers
Sets the operator-salary benchmark, maintenance capital and working-capital rates a lender would apply.
The result appears as soon as the four figures are in.
How a lender gets to the number
A listing says what the owner made. A lender asks what will be left after the buyer pays someone to run the place, keeps the equipment working, and funds the working capital a growing business ties up. Only that remainder — cash flow available for debt service, CFADS — is compared with the loan payments.
See a worked example — an HVAC business at $750,000
Worked example — an HVAC business, asking $750,000 on $1,150,000 of revenue with $205,000 of stated SDE
| Stated SDE | $205,000 |
| Year-1 growth at the industry base rate (4.0%) | +$8,200 |
| Operator compensation (industry benchmark) | −$86,000 |
| Maintenance capital (1.5% of revenue) | −$17,940 |
| Working capital tied up by growth | −$920 |
| CFADS, Year 1 | $108,340 |
| Annual debt service at 20% down (SBA loan + seller note) | $98,920 |
| DSCR | 1.09× |
| Maximum supportable price at 1.25× | $657,000 |
The seller's spreadsheet divides the full $205,000 by the payments and reads 2.07×. The lender's reads 1.09×. That gap is the operator salary, and it is the number the loan decision turns on.
What the SBA rules say, and where this calculator sits
Read from the primary documents on September 23, 2026. Dates matter here: the rules are changing on October 1, 2026.
- The coverage floor
- SBA's Standard Operating Procedure for 7(a) lending, SOP 50 10 8, in force for applications through September 30, 2026, requires operating cash flow divided by debt service of at least 1.15 on a historical or projected basis. SOP 50 10 8.1, which applies to loans numbered on or after October 1, 2026, raises the floor for a first-time buyer's acquisition to 1.25, measured on the last fiscal year or a two-year average, and no longer lets projections meet it. This calculator tests against 1.25× — the acquisition floor from October, and the level most lenders were already underwriting to.
- What counts as cash flow
- The SOP defines operating cash flow as EBITDA and lists the adjustments a lender may justify: unfunded capital expenditures, owner's draw and ownership compensation, non-recurring income, distributions. This calculator applies the conservative reading of that list by default — a market salary for whoever runs the business, maintenance capital, working capital — which is why its DSCR is lower than a seller's.
- What counts as debt service
- Principal and interest on all business debt after closing, including a seller note that is not on full standby. The seller note here amortizes from the first year, so it is counted in full.
- Equity
- A complete change of ownership needs at least 10% of total project cost injected by the buyer. A seller note counts toward it only when it is on full standby for the life of the SBA loan, and for at most half of the requirement. The 10%-down structure above is that minimum, with an amortizing note that does not count toward it.
- Rate and term
- Variable-rate loans over $350,000 are capped at Prime plus 3.0 percentage points (13 CFR 120.214). Proceeds used for goodwill or a change of ownership carry a maximum ten-year term. The calculator assumes 9.5% over 10 years, inside the cap at the current Prime rate; the full analysis lets you change both.
- What the SBA does not publish
- A DSCR calculator. SBA publishes the rules and a guaranty-fee calculator, not a coverage tool. This page applies the rules; a lender applies judgment.
Sources: SOP 50 10 8 (effective June 1, 2025) and SOP 50 10 8.1 (effective October 1, 2026), sba.gov · 13 CFR 120.214 (maximum rates) · SBA Procedural Notice 5000-875701 (7(a) small-loan coverage, effective March 1, 2026) · SBA Information Notice 5000-881797 (FY2027 fees).
What this calculator does not do
It does not verify the listing's figures, read tax returns, or know the buyer's own obligations, which a lender adds into a global coverage test of its own. It does not price the business against comparable sales, model returns, or say whether to buy. It answers one question — does the cash flow cover the debt on the lender's basis — and the full analysis answers the rest, free.
Questions
What is DSCR, and why 1.25×?
Debt service coverage ratio is the cash a business has available for loan payments divided by the payments themselves. At 1.00× the cash exactly covers the payments; below it the buyer funds the shortfall. SBA’s rules for 7(a) acquisitions set 1.25× as the floor for a first-time buyer under SOP 50 10 8.1 (loans numbered from October 1, 2026), and most lenders were already underwriting to 1.25× before that. This calculator tests against 1.25×.
Why is my DSCR lower here than in the seller’s spreadsheet?
A seller quotes SDE, which is the profit before the owner pays themselves. A lender does not lend against that: someone has to run the business, so a market salary comes out first, followed by the capital it takes to keep equipment working and the working capital a growing business ties up. Dividing what is left by the payments gives a lower, more honest number. The SOP itself lists owner compensation and unfunded capital expenditures among the adjustments a lender may make.
What is CFADS?
Cash flow available for debt service: the earnings figure after an operator salary, maintenance capital and working capital have been deducted. It is the numerator of the DSCR. On this page it is shown line by line, so you can see where each dollar went.
SDE, EBITDA or net income — which do I enter?
Enter whichever figure the listing gives you and say which it is. The calculator bridges EBITDA and net income to the same basis as SDE before deducting an operator salary, using an industry benchmark for the owner’s compensation, and tells you when it has done so. If you have SDE, enter SDE.
Does this replace a lender’s underwriting?
No. It screens a listing on the numbers the listing gives, using the rules and benchmarks a lender uses. A lender underwrites from tax returns, verified add-backs, a debt schedule and the buyer’s own finances, and applies judgment this page does not have. Use it to decide which deals are worth that conversation.
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