How to Get an SBA Loan to Buy a Business: A Buyer's Guide

An SBA 7(a) loan is a government-guaranteed loan, issued by an approved lender, that can be used to purchase an existing business. Under the SBA's 7(a) program, loan proceeds may finance the purchase price, goodwill, equipment, inventory, working capital, real estate used by the business, and certain acquisition-related costs. The maximum 7(a) loan amount is $5 million, and the loan is underwritten and closed by the lender, not by SBA directly. (SBA.gov: 7(a) Loans)

For a complete change of ownership, SBA generally requires a minimum equity injection of 10% of total project costs. Project costs include more than just the purchase price: they can also encompass working capital, closing costs, professional fees, and other costs necessary to complete the acquisition. (SBA SOP 50 10 8, effective June 1, 2025)

This guide walks through the key things a prospective buyer should understand before pursuing SBA financing: how the equity injection works, what lenders look for in a borrower, the general process from LOI to closing, and how ExitBig's buy-side advisory team helps buyers evaluate whether a target deal is financeable.

How Much Down Payment Do You Need?

For a complete change of ownership under the current SBA SOP, buyers should plan for a minimum equity injection of 10% of total project costs. A seller note on full standby for the life of the SBA loan may count toward up to 50% of the required injection, but the remainder must come from the buyer's own cash or other acceptable equity.

For example, on a $1,000,000 total project cost, a typical structure might look like this:

• SBA 7(a) loan: $900,000
• Buyer equity injection: $100,000 (10%)

Of that $100,000, up to $50,000 could potentially be represented by a qualifying seller note on full standby, with at least $50,000 from the buyer's own funds. Many lenders impose stricter requirements and may require more cash depending on the industry, the buyer's experience, collateral, and the strength of the target's cash flow.

Certain situations, such as partner buyouts or expansion acquisitions involving an existing business, may qualify for different equity requirements. These exceptions are technical and depend on the specific transaction structure. Confirm the applicable rules with a lender before relying on them.

(Source: SBA SOP 50 10 8, effective June 1, 2025; SBA.gov: 7(a) Loans)

What Lenders Look For in a Buyer

There is no single SBA minimum credit score or fixed income requirement. The lender evaluates the full picture:

• Personal credit history: Many lenders look for a FICO score above 680, though some flexible lenders may work with lower scores given strong compensating factors.
• Management or industry experience: Direct experience in the target's industry is preferred, but strong transferable management experience, a qualified operating partner, or a credible transition plan may also support qualification.
• Personal financial strength and liquidity: The lender will review your personal financial statement, tax returns, and available cash for the equity injection.
• Repayment capacity: The central underwriting question is usually whether the acquired business's cash flow can comfortably service the new loan. Lenders commonly look for a debt-service coverage ratio (DSCR) of roughly 1.15x to 1.25x or higher, though the exact threshold varies by lender and loan size.
• Personal guarantees: Owners with 20% or more ownership are generally required to provide an unlimited personal guaranty.

(Source: SBA.gov: 7(a) Loans; industry lender guidance, August 2026)

The SBA Acquisition Loan Process

While every transaction is different, a typical SBA 7(a) business acquisition generally follows these steps:

1. Determine your total project cost

Your financing request includes more than the seller's asking price. The lender evaluates the entire project cost, which may include the purchase price, inventory, equipment, working capital, professional fees, appraisal costs, and closing costs.

2. Prepare your personal and financial profile

Before approaching lenders, assemble your resume, personal financial statement (typically SBA Form 413), personal tax returns (usually three years), and documentation of available cash for the equity injection.

3. Get prequalified with SBA lenders

Apply with lenders that regularly finance business acquisitions, preferably SBA Preferred Lenders (PLP) who can make decisions under delegated SBA authority. SBA's Lender Match tool can help identify participating lenders. Ask each lender about their minimum credit score, DSCR requirements, treatment of seller financing, equity requirements, and expected timeline.

4. Sign a carefully drafted LOI

A letter of intent should generally be nonbinding (except for confidentiality, exclusivity, and access provisions), contingent on financing, contingent on satisfactory due diligence, and contingent on an SBA-compliant valuation. It should clearly address asset purchase versus stock purchase, purchase price allocation, seller training, and lease assignment.

5. Collect the seller's documents

Lenders commonly request three years of business tax returns, year-to-date financial statements, trailing-12-month financials, bank statements, accounts receivable and accounts payable aging, existing debt schedules, equipment lists, and documentation supporting any proposed add-backs. The lender underwrites from tax returns and verifiable cash flow, not simply from the seller's broker-adjusted EBITDA.

6. Complete valuation and due diligence

The lender will generally require an independent business valuation to confirm that the purchase price is reasonable and that the goodwill being financed is supportable. The lender will also examine revenue and profit trends, customer concentration, dependence on the seller, lease terms, equipment condition, and tax-return consistency.

7. Underwriting and SBA authorization

The lender underwrites the borrower, the target business, the transaction structure, the purchase price and valuation, repayment capacity, collateral and guarantees, and the source of the equity injection. A conditional approval or commitment letter typically lists remaining requirements such as a satisfactory valuation, final purchase agreement, proof of equity injection, lease assignment, insurance, and personal guarantees.

8. Close and transfer ownership

At closing, the buyer's equity is injected, the lender funds the approved loan, the seller receives the purchase proceeds, liens and security interests are filed, and required personal guarantees are signed. A realistic timeline is commonly 60 to 120 days after a signed LOI, depending on the size and complexity of the transaction.

(Source: SBA.gov: 7(a) Loans; SBA SOP 50 10 8)

What SBA 7(a) Financing Can Cover

A 7(a) loan for a business acquisition can generally finance:

• The purchase of an existing business (asset or stock purchase, depending on the transaction)
• Goodwill and intangible assets
• Equipment, furniture, fixtures, and supplies
• Working capital needed after closing
• Real estate used by the business
• Certain acquisition-related expenses and eligible refinancing

The maximum 7(a) loan amount is $5 million. The lender, not SBA, underwrites and closes the loan. (SBA.gov)

Common Deal-Killers and How to Avoid Them

Lenders scrutinize several areas that can derail an otherwise promising acquisition:

• Excessive goodwill relative to tangible assets: Lenders evaluate whether the price is supported by verifiable earnings and assets.
• Declining revenue or profits: Downward trends in the target's financials can undermine the lender's confidence in repayment capacity.
• Customer concentration: Heavy reliance on one or two customers increases risk.
• Dependence on the seller: If the business cannot operate without the seller's active involvement, the lender may question its viability post-closing.
• Unstable add-backs: Aggressive or poorly documented add-backs to EBITDA can reduce the lender's normalized cash flow calculation.
• Poor financial records: Inconsistent or incomplete tax returns and financial statements make underwriting difficult.
• Inadequate working capital after closing: The business needs enough liquidity to operate while servicing the new debt.

How ExitBig's Buy-Side Advisory Team Helps

ExitBig's buy-side advisory team works with buyers to evaluate whether a target acquisition is financeable before significant time and money are committed. Our role includes:

• Helping buyers assess whether a target's cash flow can support SBA-level debt service
• Reviewing the seller's financials for red flags that lenders are likely to flag
• Advising on deal structure, including asset versus stock purchases and purchase price allocation
• Coordinating with lenders, valuation professionals, and legal counsel to keep the transaction on track
• Identifying businesses for sale in Omaha and the greater Midwest that may fit a buyer's criteria and financing capacity

If you are considering buying a business, learn more about our buy-side advisory services. Your lender can confirm the specific qualification details for your situation before you make an offer.

Frequently Asked Questions

Can I use an SBA loan to buy a business?

Yes. SBA 7(a) loan proceeds can be used for complete or partial changes of ownership, including the purchase price, goodwill, equipment, inventory, working capital, and real estate used by the business. The maximum 7(a) loan amount is $5 million. Eligibility depends on the business type, size standards, the buyer's qualifications, and the lender's underwriting. (SBA.gov)

How much down payment do I need for an SBA business acquisition loan?

For a complete change of ownership, SBA generally requires a minimum equity injection of 10% of total project costs. A seller note on full standby may count toward up to half of that requirement, but the rest typically comes from the buyer's own funds. Many lenders require more than 10% depending on the deal. (SBA SOP 50 10 8)

What credit score do I need for an SBA 7(a) loan to buy a business?

There is no single SBA minimum credit score. Many lenders look for a FICO score above 680, though some may work with lower scores given strong compensating factors such as industry experience, additional liquidity, or a qualified operating partner. Confirm the specific requirements that apply to your situation with your lender.

How long does it take to get an SBA loan to buy a business?

A realistic timeline is commonly 60 to 120 days after a signed letter of intent, depending on the size and complexity of the transaction, the responsiveness of the seller, and the lender's underwriting process. Timelines can be longer for deals requiring complex structuring or extensive due diligence.

What can an SBA 7(a) loan finance when buying a business?

A 7(a) loan can generally finance the business purchase price, goodwill and intangible assets, equipment and fixtures, inventory, working capital, real estate used by the business, and certain acquisition-related expenses. The maximum loan amount is $5 million. (SBA.gov)