The $30,000 Your Seller Doesn't Know About

The rate cuts you were waiting for just turned into rate hikes.

On September 16, the Federal Reserve raised its benchmark rate a quarter point, to a range of 3.75% to 4.00%. It was the first increase since July 2023, and the vote was 12 to 0. Nobody in the room argued. Prime moved to 7.00% the next morning.

Then on October 7 the Fed released the minutes from that meeting, and that's the part you should read twice. Most officials said another increase would likely be appropriate by year-end. Two meetings are left on the 2026 calendar: October 27 and 28, and December 8 and 9. One of them is probably where the next quarter point lands.

If you spent the first half of this year waiting for rates to come down before you made an offer, I have bad news. That window closed. The question now is whether the deals on your list still work at the rates you're actually going to pay.

What Changed for Your Loan

Here's the thing nobody mentions when the Fed makes the news. Your SBA loan doesn't care about the federal funds rate. It cares about prime. Banks set prime at 3 points over the top of the Fed's range, so when the Fed moved, prime moved with it, from 6.75% to 7.00%. You can watch the daily series on FRED.

Now look at the ceiling. The SBA caps the variable rate on 7(a) loans over $350,000 at prime plus 3 points. Almost every acquisition worth looking at is above that line. So the most a lender can charge you on a variable-rate acquisition loan went from 9.75% to 10.00% overnight. One more hike and it's 10.25%. The program rules are on SBA.gov if you want to check them yourself.

Most acquisition loans are variable, and that matters more than the headline. Your rate resets with prime on the schedule written into your note, often monthly or quarterly. So this hike doesn't only hit deals you haven't closed yet. It hits the buyer who closed last spring, and it'll hit you the year after you close, too.

The market was already getting tighter before any of this. BizBuySell reported that 2,117 businesses changed hands in Q2 2026, down 10% from the prior quarter and down 10% from a year earlier, and brokers called financing one of the biggest hurdles to getting deals done. That was the picture with prime at 6.75%.

Watch What Happens When You Do the Actual Math

Let me show you on a composite deal, the kind that hits my inbox every week. Asking price $1.5M. SDE $500,000. That's a 3.0x multiple, right at the top of what I'll pay. Clean 80/10/10: a $1.2M SBA loan, a $150,000 seller note at 5% interest-only, and $150,000 down from you.

At last spring's ceiling of 9.75%, your monthly SBA payment is $15,692. Add the seller note interest and your total debt service is $195,809 a year. Knock 20% off the earnings and your stressed coverage comes in at 2.04x. It clears my 2.0x bar. Barely, but it clears.

Same deal at today's ceiling of 10.00%: your payment is $15,858 and your stressed coverage is 2.02x.

One more hike, to 10.25%: your payment is $16,025 and your stressed coverage is 2.00x. Right on the line.

At 10.50%, the rate I've been running every deal at all year: your payment is $16,192 and your stressed coverage is 1.98x. It fails.

Here's what makes this tricky. The dollar change looks tiny. Each quarter point costs you about $2,000 a year on a $1.2M loan. After paying a $75,000 general manager, your owner cash flow moves from $229,191 to $225,204 between 9.75% and 10.25%. Nobody goes broke over $4,000 a year.

A small number that pushes a deal across the line is not a small number.

Flip it around and look at price, because that's where you feel it. At 9.75%, this business could carry about $1,532,000 in price and still hold 2.0x stressed coverage. At 10.25%, that drops to about $1,502,000. At 10.50%, about $1,487,000. Half a point of Fed moves took roughly $30,000 off what this business can support. The seller's asking price didn't move an inch. The math underneath it did.

I had a buyer call me last month with a signed LOI. He'd built his model in June at 9.75%, and the lender's term sheet came back higher. His coverage hadn't collapsed. It had slipped from comfortable to tight, and he hadn't noticed, because his payment only went up a couple hundred dollars a month. A couple hundred dollars a month is exactly how a deal goes from safe to fragile without anyone saying a word.

The Move Before October 27

After 35 years of looking at these, I'll tell you rate cycles don't kill good deals. They expose thin ones. A business that clears 2.0x stressed coverage with room to spare shrugs off a quarter point. A business that only clears because the rate was low was never a strong deal. It was a cheap loan wearing a strong deal's clothes.

So here's what I'd do this week.

Re-run every deal at 10.50%, not today's rate. Model at the cap plus a cushion so the next hike is already priced in. That's why I run every deal through DealScore Pro at 10.5%. If it clears there, the Fed can do what it wants in October and you still sleep at night.

Use the rate move in your negotiation. Rate risk is a real, documented reason to ask for a lower price, and it's not personal to the seller. Show them the coverage at today's rate and at one more hike. On the composite deal above, that conversation is worth about $30,000. Most sellers have no idea their buyer pool just got smaller, and their broker isn't going to be the one to tell them.

Ask your lender two questions in writing. First, how often does my rate reset, and what's the spread over prime? Second, what would a fixed-rate quote look like? Fixed options exist under 7(a). They usually start higher, but in a rising cycle that premium can be cheap insurance. Get both numbers on paper before you decide.

Don't sit out and wait for the Fed. Waiting for cuts cost buyers most of this year. Waiting for hikes to stop is the same mistake in reverse. The business you want doesn't care what the Fed does next, and neither does the next buyer who makes an offer on it.

Your lender will tell you the deal still clears 1.25x. That's the bank's number, not yours. Banks won't stress test this for you, and neither will the broker.

There's one upside here nobody's talking about. Every hike pushes some buyers to the sidelines. Fewer offers on good businesses means more room for you to negotiate price, terms, and the seller note. If your numbers hold at 10.50%, a rising-rate market can work for you instead of against you.

The deal either works at 10.50% or it doesn't.

The rate is the one variable in this deal you can't negotiate. Everything else, price, structure, the seller note, the cushion you keep, is on the table. Buyers who stress test before the term sheet get to have that conversation on their terms.

What This Means For You

If you're planning to acquire in the next six months, re-run every deal on your list at 10.50% before the October 27 meeting. Anything that only clears at today's rate goes back to the seller with a new number, or comes off your list.

Want to see how I stress-test every deal against cost shocks, revenue dips, and hidden liabilities before I'd put a dollar at risk? I walk through the entire Bulletproof method in a free 28-minute masterclass.

Forward this email. Tell them to grab Mike's free book - Real Estate Is for Suckers: Buy a Business Instead. Same framework Mike uses to stress-test every deal.