How much down payment for a business acquisition loan?

Typically 10% of the total project cost (purchase price plus fees plus working capital). On a $1M acquisition that's ~$100K down — and the business's own cash flow, not your salary, services the debt.

What does the seller have to provide?

Three years of business tax returns, interim financial statements, and often a bill of sale structured around the loan closing. Seller financing on a portion (typically on full or partial standby) can also strengthen the deal.

How does the acquired business's cash flow qualify the loan?

Lenders compute debt service coverage (DSCR) from the target company's historical earnings — usually wanting 1.25x+ coverage of the new loan payment from the business's cash flow, including your projected salary.

Can you finance goodwill and intangibles?

Yes, under the standard 7(a) program the full purchase price including goodwill can be financed with the SBA guarantee. (Changes to the old 504 goodwill limits have relaxed this considerably — ask your lender about current terms.)

SBA Business Acquisition Loans (2026): Buy a Business with 10% Down

Why 7(a) Owns Business Buying

Conventional lenders rarely finance small business purchases — too much goodwill, not enough hard collateral. The SBA 7(a) guarantee changes the math:

10% down on the total project (price + fees + working capital)
Up to $5 million — covers the vast majority of main-street deals
10-year terms (25 if real estate is included), keeping payments inside cash flow
Business cash flow qualifies — you're not personally repaying a $1M loan on a salary

How Lenders Underwrite an Acquisition

The underwriting question is simple: can the acquired company, after paying you a market salary, cover the loan payment with cushion? Lenders answer it with:

Historical cash flow: 3 years of the target's tax returns and financials — restated to SDE (seller's discretionary earnings) or EBITDA, then adjusted for your projected manager salary
DSCR test: (cash flow after your salary) ÷ (annual debt service) ≥ ~1.25x. Model your own deal with how much SBA loan can I get.
Buyer qualifications: credit 680+, industry or management experience, and 10% equity injection — sourced, not borrowed
Deal quality: customer concentration, owner dependence, and whether the seller will stay for a transition period

Structuring the Deal

A few structures make SBA acquisitions dramatically more financeable:

Seller note on standby: the seller finances 5–10% and takes no payments during the loan term — counts toward your equity injection and signals seller confidence
Working capital in the loan: roll 10% of the price into post-close operating cash rather than arriving leveraged and cash-poor
Escrow / holdback: a slice of the price held against misrepresented financials
Non-compete + training period: often required; 30–90 days of seller transition support is standard

Where Acquisition Deals Die

Unverifiable seller earnings — books that don't match tax returns kill underwriting (insist on tax-verified numbers before the purchase agreement)
DSCR below 1.15x — price too high for cash flow; renegotiate or walk
Form and document mismatches — the #1 avoidable delay, per common SBA application mistakes
Buyer can't document the 10% injection — gift letters and seasoned funds only; handshake loans from family don't count

How to Apply — Fast

The package: LOI and purchase agreement, 3 years of seller tax returns and financials, your personal returns and resume, source-and-use schedule, and completed SBA Form 1919 and Form 413. PrepSBA auto-fills the SBA forms, builds the DSCR model from the seller's tax-verified numbers, flags inconsistencies before the lender does, and outputs a single lender-ready PDF in about 30 minutes — critical when you're racing a purchase agreement deadline. See also how to qualify for an SBA loan.

Frequently Asked Questions

Can you get an SBA loan to buy a business?

Yes — acquisitions are among the most common 7(a) uses: purchase price, closing costs, and working capital with 10% down, repaid by the company's own cash flow.

How much down payment?

Typically 10% of the total project cost. On a $1M deal, roughly $100K from your own verifiable funds — seller standby notes can supplement it.

What must the seller provide?

Three years of tax returns, interim financials, and cooperation with the deal structure — often including a transition period and sometimes standby seller financing.

How does the business's cash flow qualify the loan?

Lenders want ~1.25x debt service coverage: the target's historical earnings after your projected salary must cover the new payment with cushion.

Can you finance goodwill?

Yes — under standard 7(a), the full price including goodwill is financeable with the SBA guarantee. Confirm current terms with your lender.