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

Will It Pencil?

Run a real SBA 7(a) deal in 60 seconds, before you call the broker

Type the asking price, the cash flow, and how much cash you can put in. You get the real capital stack, the monthly loan payment, the cash flow left after a market owner salary, and a single verdict on the DSCR against the 1.25x lender floor and the 1.5x Regalis Capital standard.

Deal Inputs

The full price the seller is asking for the business, the sticker price on the listing. Example: if a listing says the business is for sale at 1,000,000 dollars, type 1000000.
$
The yearly profit the listing advertises for the owner, before you verify it. On most main-street listings this is SDE, the cash an owner takes home including their own pay. Example: a listing that says SDE of 300,000 dollars a year means you type 300000. Type the yearly number, not a monthly one. If the listing instead quotes EBITDA, open More options and switch the profit type.
/ yr
The non-borrowed money you can actually inject into the deal, your own savings you would put down, not money you plan to borrow. Example: if you have 80,000 dollars in savings you are willing to use, type 80000. This is checked against the cash the SBA requires you to bring. Leave it blank if you are not sure yet; the verdict still computes.
$
Pick which kind of yearly profit number you typed above. SDE is the profit the current owner takes home and includes paying themselves, common on smaller main-street listings. EBITDA is profit after paying a manager to run it, common on larger deals. If you only see one number on a small business, it is almost always SDE, so leave this on SDE.
A fair market salary for someone to do the owner's job, which we subtract from the yearly profit so the number reflects a hired operator, not free owner labor. We fill this in for you based on the deal size and you can change it. Example: on a 300,000 dollar SDE deal we fill about 68,000. It is set to 0 and locked when you pick EBITDA, because EBITDA already pays a manager.
$
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. Example: type 7.5 for seven and a half percent. Only change it if you know today's Prime is different.
%
The extra percent the SBA lender charges on top of Prime, usually 1.5 to 2.75 percent. The default 2.0 is a fair midpoint. Example: leave 2.0 unless a lender quoted you a different number. Your real rate is Prime plus this number.
%
Will the seller lend you part of the price with no payments and no interest until your SBA loan is paid off (a full-standby 0 percent seller note)? This can count toward the cash the SBA wants you to put in. Pick Unknown if you have not asked yet. Example: a seller financing 5 percent of the price this way helps you cover the cash you must bring.
The all-in cost of the deal including closing costs and day-one working capital, not just the asking price. Leave this blank and we estimate it at 1.10 times the asking price, which is typical. Only fill it in if you already have a precise all-in number. Example: leave blank for a quick screen.
$

Verdict

Type the price and the yearly profit, then press Run The Numbers. The DSCR, the loan payment, and the verdict show up here.