While the 6x to 7x buyer revenue get’s you in the ballpark of the SBA acquisition loan amount a borrower can qualify for, it is the combined buyer and seller practice cash flow that drills down your loan preapproval ballpark more precisely.
This is how AdvisorLoans does a quick and dirty calculation of your debt service coverage ratio (DSCR) to determine the loan payment the borrower can afford.
Take the Cash flow of what the combined practice will be (GDC less B/D split less any expenses incurred) less cash needed for personal living expenses and divide by 1.25 = annual debt payments the company can support.
You can typically get qualified for an acquisition loan at about 7 times what that annual debt payment is.
- $500,000 producer acquiring a $500,000 producer
- 90% payout
- $100,000 of office expenses
- $200,000 in personal living expenses (buyer)
- Results in $600,000 combined cash flow
- Divide by 1.25 = $480,000 annual debt payments it could support
- $480,000 x 7 = $3,360,000 total loan amount (which is 6.6x the buyers revenue)
Contact AdvisorLoans for a free consultation.
Join our list
Subscribe to our mailing list and get interesting stuff and updates to your email inbox.