Coverage on history, not projections
Under SOP 50 10 8.1, acquisitions need 1.25 debt service coverage on historical cash flow. Projections can explain the plan, but they can't carry the loan.
INDUSTRIES · SBA AND BUSINESS BUYERS
SBA lenders approve the numbers a business has already earned.
For first-time buyers and operators using SBA 7(a) and 504 loans to buy a care home, an adult day center or another operating business, who need the projections, business plan and coverage math a lender will sign off on.
Where these deals go wrong
The equity injection
At least 10 percent of the total project cost on an initial acquisition, with at least half coming from your own cash or other unlimited sources.
The seller's add-backs
Lenders and quality of earnings reviewers test every add-back, and the deposits in the bank statements have to match the revenue the seller reported.
Working capital
Buyers underfund the cash it takes to get through the transition, especially when a license transfer or slow payers delay collections.
Services for SBA
ALL SERVICES →Lender and SBA Projections
Multi-year projections, debt service coverage, and the working capital it actually takes to get to stabilization.
Deal Review
A written verdict on a live deal.
Acquisition Underwriting
A full model built from your source documents, plus the live Excel file.
Due Diligence Support
Leases abstracted, census and payer mix tested, trailing financials rebuilt, expenses repriced.
Independent Underwriting Review
A fresh underwriting from the source documents, compared line by line against yours.
Market and Feasibility Studies
Competitor rates, occupancy and demand for a facility or apartment market, before you buy or build.
Case study
ALL CASE STUDIES →Common questions
How much do I need to put down?
On an initial acquisition, at least 10 percent of the total project cost under SOP 50 10 8.1, with at least half from unlimited sources such as your own cash. On a 504 for a special-purpose property like assisted living, it is 15 percent, or 20 percent if the business has operated for less than two years.
What coverage does the lender need?
For initial acquisitions and owner buyouts, 1.25 on historical cash flow, meaning the last fiscal year or the average of the last two, adjusted for items like owner compensation and one-time expenses.
Do I need a quality of earnings report?
Yes, on initial acquisitions and business expansions when the business purchase price is $3 million or more.
Do I have to personally guarantee the loan?
Anyone who owns 20 percent or more signs an unlimited personal guarantee, and no lender can waive it.
Do you write the business plan too?
Yes, alongside the projections, so the plan and the numbers tell the same story.
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