Seller Net Proceeds & Deal Structure Calculator for Business Sales
A $5,000,000 headline purchase price rarely puts $5,000,000 in a Texas business owner's bank account at closing. Between equipment and bank debt payoff, net working capital peg adjustments, broker success fees, indemnification escrow holdbacks, seller notes on SBA 7(a) transactions, earnouts, and federal tax allocation, two offers with the same headline price can differ by $800,000 or more in Day-1 cash.
Compare Three Deal Structures Side by Side
Adjust your enterprise value, balance-sheet payoff items, working capital variance, and deal terms below to see your headline estimate, then enter your email to unlock the full line-by-line waterfall and receive a copy.
Your Deal Inputs
Option A: Clean Cash Deal
Estimated after-tax cash at closing (plus $171,000 net escrow after release).
Option B: SBA 7(a) + Seller Note
Estimated after-tax cash at closing (plus $684,000 net note + escrow over time).
Option C: Earnout / Rollover Deal
Estimated after-tax cash at closing (plus up to $1,026,000 at risk post-close).
| Waterfall Line Item | Option A: All-Cash (With Escrow) | Option B: SBA 7(a) + Seller Note | Option C: PE / Earnout + Rollover |
|---|---|---|---|
| Headline Enterprise Value | $4,500,000 | $4,500,000 | $4,500,000 |
| Working Capital Peg Adjustment | -$75,000 | -$75,000 | -$75,000 |
| Less: Bank & Equipment Debt Payoff | -$450,000 | -$450,000 | -$450,000 |
| Less: Broker / M&A Success Fee | -$270,000 | -$270,000 | -$270,000 |
| Less: Legal, CPA & Closing Costs | -$55,000 | -$55,000 | -$55,000 |
| Less: Indemnification Escrow Holdback | -$225,000 | -$225,000 | -$225,000 |
| Less: Deferred Seller Note / Earnout / Rollover | $0 | -$675,000 | -$1,125,000 |
| Pre-Tax Cash Wired at Closing | $3,425,000 | $2,750,000 | $2,300,000 |
| Estimated Federal Tax on Closing Cash | -$822,000 | -$660,000 | -$552,000 |
| Estimated Day-1 After-Tax Cash at Close | $2,603,000 | $2,090,000 | $1,748,000 |
| Deferred / Contingent After-Tax Value (If Paid in Full) | $171,000 | $684,000 | $1,026,000 |
What changes the Day-1 check most:
On a $4,500,000 headline offer, moving from a 25% earnout/rollover structure to a clean cash structure increases your Day-1 after-tax cash by $855,000. Buyers demand large seller notes and earnouts when the business depends on the owner, customer concentration is above 15%, or job-level margins cannot be verified.
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How to Shift Your Deal Toward Cash at Closing
Buyers and SBA 7(a) underwriters use deferred seller notes and earnouts to insure themselves against risks they uncover in diligence. Preparing 12 to 24 months ahead of market changes the waterfall in three direct ways:
- Replacing contingent earnouts with bankable cash: When a business passes the 14-Day Absence Audit and has a documented second-line manager, buyers do not need a 25% earnout to force the seller to carry post-close customer retention.
- Protecting the Working Capital Peg: Most LOIs specify a "cash-free, debt-free" purchase with a normalized 12-month average Net Working Capital (NWC) target. Owners who let accounts receivable age or carry unbilled work-in-progress into closing suffer a dollar-for-dollar deduction at the closing table. See our Net Working Capital (NWC) Peg Calculation Guide and Texas business sale process guide for how the NWC peg is negotiated.
- IRS Form 8594 Purchase Price Allocation: Even though Texas levies no state personal income tax (and a $2.65 million No Tax Due threshold on the Texas Franchise Tax for 2026), federal tax treatment differs sharply between Class V depreciated equipment (recaptured at ordinary income rates up to 37%) and Class VII goodwill (taxed at the 20% long-term capital gains rate plus 3.8% Net Investment Income Tax where applicable). Always model Form 8594 with your CPA before signing an LOI.
Questions Texas Owners Ask About Net Sale Proceeds
Why is my cash at closing lower than the enterprise value in the Letter of Intent?
Most Texas lower-middle-market deals are priced on a cash-free, debt-free basis with a normalized Net Working Capital peg. From the headline price, the closing statement deducts payoff of all term debt and equipment liens, any working capital shortfall against the 12-month peg, broker or M&A success fees, transaction legal/CPA fees, indemnification escrow holdbacks, and any seller note or contingent earnout.
Does Texas charge state capital gains tax on the sale of a business?
Texas does not impose a state personal income tax or state capital gains tax on individual sellers. At the entity level, Texas levies the Texas Franchise Tax, which has a $2.65 million annualized total revenue No Tax Due threshold for 2026 (Texas Comptroller). Federal income, depreciation recapture, and capital gains taxes still apply in full.
How does an SBA 7(a) seller note affect my net proceeds?
Under SBA SOP 50 10 8, SBA 7(a) acquisition loans cap at $5,000,000 in gross loan proceeds and commonly include a 10% to 20% seller note. If part of the seller note is used to satisfy half of the buyer's 10% equity injection requirement, that note must remain on full standby (no principal or interest payments) for at least 24 months after closing.
How does purchase price allocation on IRS Form 8594 change my tax bill?
In an asset sale, the buyer and seller must report matching purchase price allocations across seven asset classes on IRS Form 8594. Amounts allocated to inventory, accounts receivable, non-compete covenants, and depreciation recapture on fleet/equipment (Section 1245) are taxed at federal ordinary income rates up to 37%, whereas amounts allocated to goodwill and going-concern value qualify for long-term capital gains treatment.
How can I reduce the seller note or earnout a buyer asks for?
Buyers use large seller notes and earnouts when they fear revenue will drop after the owner leaves or when financial records are messy. De-risking owner dependency, cleaning up monthly accrual financials, and documenting customer contracts 12 to 24 months before going to market shifts leverage toward cash at close. Compare your readiness in the EBITDA Multiple & Value Gap Calculator or start at Start Here.