The 1.25x Test

Run the SBA coverage test before the lender does

For loan numbers issued on or after October 1, 2026, SOP 50 10 8.1 Appendix 15 requires acquisition loans to clear debt service coverage at 1.25:1 for Initial Acquisition, Owner Buyout, and ESOP or cooperative transactions (1.15:1 for Business Expansion, subject to any higher lender standard), using the independent Quality of Earnings figure on deals of $3 million and above. Enter the deal as you understand it and see the loan the numbers support.

The Earnings

Normalized EBITDA available for debt service ($/yr)

Trailing twelve months, after a market-rate manager salary and after the add-backs you believe survive an independent review. No projections; the rule tests history.

The Structure

Proposed purchase price ($)

Buyer equity injection (%)

Seller note ($)

SBA 7(a) rate (%)

Term (years)

Seller note rate (%)

Seller note term (years)

Seller note on full standby (no payments counted in coverage)

Coverage standard

Subject to any higher lender standard (SOP 50 10 8.1, Appendix 15).

What the Numbers Support

2.04x

Coverage at the proposed structure

Senior loan implied by your structure$2,800,000

Annual debt service (SBA loan + seller note)$538,542

Maximum senior loan at the standard$4,908,778

Maximum purchase price at this equity and note$5,843,087

Headroom (or gap) in annual earnings+$426,822 / yr

Clears the 1.25x standard with $426,822 of annual earnings to spare. At this equity and seller note, the numbers support a purchase price up to about $5,843,087. The question becomes whether the earnings figure survives the independent review; use the slider.

What an independent review does to the loan: earnings reduced by 0%

Every dollar the QoE removes from claimed earnings comes out of the maximum loan. Drag to see the dollar value of the seller’s add-backs.

Maximum senior loan after the haircut$4,908,778

Loan capacity lost$0

Want the numbers verified before the bank verifies them? Workup Pro runs the full analysis, cash proof included, in five business days.

See the tiers Get the letter

This calculator applies standard amortization arithmetic to the figures you enter and the coverage standards described in SBA SOP 50 10 8.1. It is an illustration, not a loan approval, a valuation, or advice; lender underwriting includes many other factors. Confirm the applicable standard and treatment of seller notes with your lender. Workup AI, Inc. provides analytical services.