Transcript
Debt coverage. Target 1.35 times or better at underwriting. 1.25 times is the SBA floor, so leave margin. Multiple. Add or under 2.8 times recast SDE at 500K to 1 million dollars, and 3.1 times at 1 million dollars to 2 million dollars. English hard pass on seller SDE that only works with the owner working full-time and unpaid. Record. Three years of tax returns, trailing 12 months flat to growing, no year down more than 15% unexplained.
Under two years, turnaround or declining, single season proof, recurrence 40% or more of revenue recurring, contracted or repeat by system, retainers, maintenance plans, memberships, rebooking, purely transactional with paid ads dependence, owner dependence, owner at 20 hours a week or less in delivery, a GM or lead in place for one plus year and staying, SOPs and a CRM in use, owner as the top salesperson, top tech or license holder with no transfer path, concentration no customer over 15%, 20% absolute max with a contract plus holdback, no channel over 50%, any single point of failure that is unpriced geography digital, U.S. remote team fine, local Metro Atlanta within about 45 minutes, the owner must actively manage.
It also matches the pet and rental footprint.
A local business outside daily management reach presented as absentee, financing, available, operating, non passive, transferable, licenses lease at least as long as the loan term including options, seller open to a 5% standby note plus a 60 to 90 day transition, seller demands all cash, no transition, no standby, short lease, structure, asset sale preferred, 45 plus days of diligence plus a financing contingency in the LOI, seller non compete and non solicit for three to five years, stock sale with undisclosed liabilities and no reps or holdback, first 90 days value plan to underwrite to but not to pay for, implement or repair the CRM and pipeline stages, AI speed to lead and reactivation of dormant customers, a review generation system, a maintenance or membership offered to the installed base and a weekly cash flow and GM dashboard.
If the deal only works after that upside, the price is wrong, pay for proven cash flow and treat the edge as your return, not the seller's recast SDE and price check the 30 second screen from stage zero of the diligence checklist, enter listings numbers, the tool recuts SDE the way this buy box requires prices, it against the band caps and test debt coverage the way an SBA lender will on historical cash flow only, nothing is saved or sent anywhere, asking price, seller stated SDE, market GM, manager salary to deduct, other normalization deductions, down payment, loan rate, APR, loan term, years, seller note, percent of price, $350,000 recast SDE after the manager is paid, 3.43 times asking multiple on recast SDE, $1,085,000 max price at the band cap for this size, 2.00 times DSCR on recast SDE, SBA floor 1.25 times, buy box target 1.35 times, how it works, recast SDE equals seller SDE minus the GM salary minus other normalization, market rent, family labor replacement, recurring one time costs, the band cap follows the buy box, 2.0 times under 500K, 2.8 times at 500K to 1 million, 3.1 times at 1 million to 2 million, in the example the ask is $1.2 million against $350,000 of recast SDE, a 3.43 times multiple, so the max price at the cap is $1,085,000 below the ask, that gap is the negotiation or the reason to walk, the loan is the price minus the down payment and any seller note, amortized over the term, a seller note only counts toward the SBA 10% equity injection if it sits on full standby for the life of the loan, this is a screen, not underwriting, a named lenders read governs.