Most buyers come into their first SBA deal thinking the structure is simple: 10% equity, 90% SBA loan. Three months later they're scrambling to find an extra $60K at close because nobody explained how fees work.
Your equity percentage applies to Total Project Cost, not Enterprise Value. TPC = EV plus closing costs. On a $3M deal with $120K in closing costs, TPC is $3.12M. Your 10% equity is $312K, not $300K.
The SBA guarantee fee on a $2.8M loan is roughly $75K. It gets rolled into the loan, but it still affects your equity calculation because it's part of TPC. Buyers who model off EV consistently show up to lender conversations short by $30–80K.
SBA deals typically have two types of seller paper.
Note A is on full standby for 24 months — no principal, no interest. The SBA requires this. It's genuinely a feature: it reduces Year 1 and Year 2 debt service and gives you runway to stabilise the business before you start paying down seller paper.
Note B amortises from day one. Lower balance, typically 7–10 year term. This hits your DSCR calculation immediately.
When a broker quotes you a DSCR, ask whether it includes Note B payments. Many don't model it correctly.
During the 24-month interest-only period on your SBA loan, you're paying interest only — not principal. On a $2.5M SBA loan at 11%, that's ~$22.9K/month. Once P&I kicks in, it's ~$34.6K/month. That $11.7K monthly difference is the gap between a 1.21× DSCR and a 1.44× DSCR in Year 1.
Model Year 1 (IO), Year 2 (IO), and Year 3 (full P&I). Year 3 is your real stress test. If it clears 1.25× at conservative CFADS, you have a fundable structure.
Equity (% of TPC) + buyer legal (~$15K) + any WC injection you're funding = actual cash at close. On a typical $3M deal that's around $340–360K. Most buyers show up budgeting $300K.
The shortfall isn't a surprise if you model it correctly upfront. It almost always is a surprise if you don't.