SDE & Add-Back Calculator
See your business value two ways: the number your broker will show buyers, and the number an SBA underwriter will actually approve. The gap between them is where deals die.
Real example: A $1.4M HVAC deal died in underwriting when the broker's $390K SDE became $230K of lender EBITDA — a $480K valuation gap the seller never saw coming. This tool shows you that gap before you fall in love with the broker's number.
Your business basics
Use your most recent full year. Nothing is saved or shared without your permission.
Source: BizBuySell 2025 Insight Report & IBBA Market Pulse Q3 2025 — refresh quarterly.
Total revenue for your most recent 12 months. Used to set default lender adjustments.
Bottom-line profit before owner compensation. Use the figure on your Schedule C or corporate return — what you reported to the IRS.
Why Two Numbers Matter
Most online valuation tools give you one number — what your broker wants you to believe. This tool gives you two: the Seller SDE (what brokers market) and the Lender-Adjusted EBITDA (what banks actually underwrite). The gap between them is where deals die after the LOI.
When a buyer applies for an SBA 7(a) loan, the bank runs its own numbers — and they look nothing like the broker's CIM. They subtract a manager salary (because the buyer may not work in the business), subtract maintenance CapEx (because depreciation isn't the same as real capital spending), and reject any add-back they can't verify with a receipt. The resulting number is often 20–40% lower — and that's the number the loan is based on.
The Add-Backs Lenders Reject
Lenders want proof the vehicle is 100% business-use. Mixed-use gets rejected or haircut.
Even documented, expect a 50% haircut. The buyer won't have your same travel patterns.
These transfer no economic benefit to a buyer. Rejected in virtually every QoE review.
Only the above-market portion is an add-back — and you must document the market rate.
If it appeared on the P&L three years in a row, a buyer's diligence team will call it recurring.
Cell phone, home office — even documented, lenders apply a haircut to reflect personal use.
Methodology — how every number is calculated
Seller SDE = Net Profit + Owner W-2 + Owner Benefits + Interest + D&A + One-Time Expenses + All Risky Add-Backs
Lender-Adjusted EBITDA = SDE − Market-Rate Manager Salary − Maintenance CapEx − Undocumented Risky Add-Backs (100%) − Documented Risky Add-Backs (50% haircut)
Blended Multiple = simple average of (a) IBBA industry SDE midpoint and (b) IBBA size-tier median: under $200K SDE → 2.0×; $200K–$400K → 2.5×; over $400K → 3.0×
Asking Price = Seller SDE × Blended Multiple. Expected Sale Price = 85% of Asking Price (30-year market norm per BizBuySell data).
Bank-Supported Price = Lender EBITDA × Blended Multiple. SBA Loan = 90% of Bank-Supported Price.
DSCR = Lender EBITDA ÷ Annual SBA Debt Service. Debt service calculated using a standard annuity formula at the assumed SBA 7(a) rate over 10 years. SBA minimum: 1.25×.
Data last updated: June 2025. Sources: BizBuySell 2025 Insight Report, IBBA Market Pulse Q3 2025, SBA SOP 50 10 8 (effective June 1, 2025). Multiples should be refreshed quarterly against primary sources.
Frequently Asked Questions
What is SDE (Seller's Discretionary Earnings)?
SDE is the total economic benefit available to a single owner-operator: net profit + owner compensation (salary, benefits, distributions) + add-backs (non-recurring expenses, depreciation, interest). It's the standard valuation metric for businesses under $5M. Buyers apply a multiple to your SDE to determine the purchase price.
What's the difference between SDE and lender-adjusted EBITDA?
SDE is what your broker presents. Lender-adjusted EBITDA is what an SBA underwriter uses. Lenders subtract a market-rate manager salary, maintenance CapEx, and discount or reject risky add-backs. The gap — often 20–40% — is what silently kills deals after the LOI.
What add-backs do lenders reject?
The most commonly rejected: personal vehicle expenses, travel & entertainment with personal elements, charitable contributions, family payroll above market rate, and recurring 'one-time' expenses. Even documented versions get a ~50% haircut in a Quality of Earnings (QoE) review.
Why is my lender number so much lower?
A buyer will need to pay a manager to replace you (typically $65K–$85K/year), real capital spending is a real cost even if you've been writing it off as depreciation, and any add-backs without clear documentation are rejected. A $400K broker SDE becoming $250K of lender EBITDA is common — and the bank only lends against the lower number.
What is DSCR and why does it matter?
DSCR (Debt Service Coverage Ratio) = Lender EBITDA ÷ Annual SBA loan payments. The SBA requires a minimum 1.25×. If the ratio falls below that, the buyer's financing doesn't underwrite, and the deal typically collapses after the LOI. It's the #1 financing-related deal-killer for Main Street businesses.
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Get Matched Free →SDE multiples: BizBuySell 2025 Insight Report & IBBA Market Pulse Q3 2025. SBA rules: SOP 50 10 8, effective June 1, 2025. Refresh quarterly.