How do SBA loans work for business acquisitions?

The SBA 7(a) loan is the most common financing tool for buying a small business. The SBA doesn't lend directly — it guarantees a portion of the loan made by an approved lender, which makes banks more willing to finance acquisitions. Terms, rates, and qualification requirements change periodically, so the best move is to get connect with SBA-preferred lenders early in your search. We can connect you with lenders who specialize in business acquisition financing.

What is seller financing and why does it matter?

Seller financing is when the seller agrees to accept a portion of the purchase price as a promissory note — paid out over time rather than all at closing. It reduces your upfront cash requirement and can make a deal financeable that otherwise wouldn't be. It also signals that the seller believes in the business's continued performance, which is a strong signal to you and your lender. In many SBA-financed deals, a seller note is used to supplement the buyer's down payment.

How are small businesses valued?

Most owner-operated businesses are valued using a multiple of Seller's Discretionary Earnings (SDE) — the total cash flow available to a working owner after adding back salary, personal expenses, depreciation, and non-recurring items. The multiple applied depends on the industry, growth trajectory, customer concentration, transferability, and quality of financial records. We cross-check every valuation against comparable transaction data to make sure the asking price is grounded in what the market is actually paying.

What does the buying process look like?

Seven steps. Define your criteria and confirm your capital. Review matched opportunities under NDA. Analyze the financials and offering package. Submit a Letter of Intent with your proposed price and terms. Conduct due diligence — financials, lease, operations, legal. Close with your attorney and fund the transaction. Then the seller transitions you into the business, typically over a few weeks to a few months. Start to close usually runs six to nine months.

What advisors do I need to buy a business?

At minimum, a transaction attorney and an accountant. You'll also want a lender involved early if you're financing — SBA loans in particular have their own timeline and requirements that can affect the deal. The most important thing when choosing any of these advisors is small business transaction experience. A general practice attorney or a tax accountant who has never been through a business sale will slow you down. Ask how many small business acquisitions they've handled before you engage them. You don't need everyone locked in on day one. But you should know who you're calling before you submit a Letter of Intent.

Do I need industry experience?

Not always. What matters more for most businesses is management ability, financial literacy, and willingness to learn during the training period. Some industries require specific credentials or licenses. Others can be learned by a motivated operator in a matter of months with proper training from the seller. Relevant experience strengthens an SBA loan application, but it's not always a hard requirement.