Deal Recon Kit by The Morning Deal

Deal Recon Kit

Five tools to read a deal before it reads you

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Deal Recon Kit by The Morning Deal

Deal Killer Score

Score an SBA 7(a) deal in 60 seconds

Paste a listing's key numbers. Get a 0 to 100 score, a clear verdict, the modeled DSCR, and the dealbreakers you should raise with the broker, before you waste a single call.

The deal

The total price the seller or broker is asking for the business. Use the headline number from the listing. Example: a listing priced at $1,200,000 means you type 1200000.
$
The yearly profit the listing advertises for the owner, before you verify it. On most main-street listings this is called SDE (the cash an owner takes home, including their own pay). Example: a listing that says 'SDE: $300,000' means you type 300000. If the listing instead quotes EBITDA (profit after paying a hired manager), open More options and switch the profit type.
/ yr
Pick the closest category for what the business does. A few categories (restaurant, bar, retail, gas station, licensed or medical) are automatic walk-aways for a first-time SBA buyer, so this directly drives the score. Example: a bookkeeping firm or a small distributor is 'Other'. If nothing fits, choose Other.
How many years the business has been operating under any owner, from the listing. Lenders want a real track record, so under 2 years is a hard problem. Example: 'established 2015' is about 11 years, so you type 11.
yrs
SDE is the most common for small businesses and includes the current owner's pay. EBITDA already assumes a hired manager is paid, so we will not subtract a manager salary again. Example: most main-street listings quote SDE, so leave this on SDE unless the listing clearly says EBITDA.
On-site means it has a location you must be near to run (a shop, a route). From anywhere means it can be run remotely (online, services). This decides whether drive time counts against the deal. Example: a local print shop is on-site; a niche software tool is from anywhere.
How long it takes you to drive from home to the business, in hours. Only matters for an on-site business. Example: a 90-minute drive is 1.5. Leave at 0 for a business you can run from anywhere.
hrs
Does the asking price bundle in the building or land, not just the business itself? Bundled property is a fixable problem, not a deal-killer, so it lowers the score rather than ending the deal. Example: a listing 'business plus building, $2M' is Yes.
A seller note is money the seller lets you pay back over time instead of all in cash. 'Full-standby, 0% for 10 years' means you pay the seller nothing during the SBA loan term, which keeps the deal financeable. Example: choose Unknown if the listing does not say; you confirm it later in the offer.
The market pay for someone to run the business in your place. We fill this in automatically based on the size of the deal, and you can edit it. It is subtracted from SDE to find the true profit a lender will count. Example: on EBITDA this is set to 0 and locked, because EBITDA already accounts for a manager's pay.
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The base interest rate SBA loans are priced off, published as the Wall Street Journal Prime Rate. The default of 7.5 is a reasonable current figure; change it only if you know today's Prime is different. Example: type 7.5 for seven and a half percent.
%
The extra percent the SBA lender charges on top of Prime. Real SBA 7(a) acquisition loans land between 1.5 and 2.75. The default 2.0 is a fair midpoint; leave it unless your lender quoted something specific. Example: type 2.0 for two percent over Prime.
%
The all-in cost of the deal including closing costs and working capital, not just the asking price. Leave this blank and we estimate it at 1.10 times the asking price, which is typical. Example: leave blank for a normal deal; only fill it if you have a more exact all-in number.
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Scored result

Fill in the four essentials and click Score this deal. Your verdict, DSCR, and dealbreakers appear here.