SBA Loans: The Buyer's Guide to Financing a Business Purchase

The Small Business Administration's 7(a) loan program remains the go-to financing tool for buyers acquiring an existing business. With lower down payments and longer repayment terms than conventional loans, SBA financing can make acquisitions accessible that would otherwise be out of reach.

How SBA 7(a) Loans Work

The SBA does not lend money directly — it guarantees a portion (up to 85%) of the loan made by an approved lender. This guarantee reduces the lender's risk, allowing them to offer more favorable terms.

What Lenders Look For

To qualify, the business being acquired must have positive cash flow sufficient to cover debt service. Lenders typically require a Debt Service Coverage Ratio (DSCR) of at least 1.25 — meaning the business earns $1.25 for every $1.00 of annual loan payment.

Buyer requirements usually include:

Seller Financing as a Bridge

Many SBA deals include a seller note — the seller carries back a portion of the purchase price (typically 10–30%) as a loan to the buyer. This signals the seller's confidence in the business and satisfies the lender's equity requirements.

Use our SBA Loan Calculator to estimate your monthly payment and see if a target business cash flows after debt service.