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Free buyer resource · FinancingFinance your acquisition
How buyers fund a business purchase, what lenders look for, and how to keep the cash you need at closing manageable.
Free guide · No fees for buyersMost small-business purchases are financed with a mix of the buyer's own cash, an SBA-guaranteed loan such as the SBA 7(a), and seller financing. SBA 7(a) loans go up to $5 million, and lenders look at the business's cash flow, your experience, your credit and the equity you put in. A seller note or earn-out can reduce the cash you need at closing.
Financing shapes almost every part of a deal: the price you can afford, the timeline and the terms you negotiate with the seller. Sorting it out early makes your offers stronger.
This free guide explains the main options. Program rules, rates and fees change, so always confirm current terms with an SBA lender or your bank.
How to do it
Know your numbers
Check your credit, count the cash you can invest and the reserves you need to live on, and list your industry and management experience. Lenders weigh all three.
Get pre-qualified early
Talk to two or three lenders that regularly finance acquisitions before you make an offer. A pre-qualification shows sellers and brokers you are serious.
Choose the right loan
For many deals an SBA 7(a) loan is the main option, with terms of up to 10 years for a business purchase and longer when real estate is included. Conventional bank loans suit buyers with more equity and collateral.
Negotiate seller financing
Ask the seller to carry part of the price as a promissory note. It reduces the cash you need and keeps the seller invested in a smooth handover. Lenders may set rules on when it can be repaid.
Consider an earn-out
An earn-out pays part of the price later if the business hits agreed targets. It bridges a gap when you and the seller disagree on value.
Prepare your loan package
Expect to provide personal financial statements, tax returns, a resume, the business's financials, the letter of intent and often a short business plan with projections.
Options compared
| Option | Typical role | Things to know |
|---|---|---|
| Buyer equity | The cash you put in | Lenders expect real money at risk; keep reserves too |
| SBA 7(a) loan | Main source of funding | Up to $5M; guaranty fee and personal guarantee usually apply |
| Seller note | Covers part of the price | Lender rules may limit repayment while the SBA loan is outstanding |
| Earn-out | Part of price paid on performance | Needs clear, measurable targets in the contract |
| Conventional bank loan | Alternative to SBA | Usually needs more equity and collateral |
General information only. Figures and rules vary by deal, lender and location.
Common mistakes
- Making offers before speaking to a lender.
- Using every dollar of savings for the down payment and leaving no working capital.
- Agreeing seller-note terms that the lender later rejects.
- Assuming last year's SBA rules still apply; check the current requirements.
Frequently asked questions
How much down payment do I need to buy a business?
It depends on the lender and the loan. SBA lenders commonly expect an equity injection of around 10% of the project for a change-of-ownership deal, and some of that can sometimes come from a seller note. Conventional loans often need more.
What is the maximum SBA 7(a) loan?
The SBA 7(a) program allows loans of up to $5 million.
Can I buy a business with no money down?
Truly zero-down deals are rare. Combining an SBA loan with seller financing can keep your own cash low, but lenders still want to see some of your money in the deal.
What credit score do I need?
There is no single SBA minimum, but lenders generally look for good personal credit and a clean repayment history. Ask lenders what they require.
How long does SBA loan approval take?
It often takes several weeks to a couple of months from a complete application to funding, depending on the lender and the deal.
What is seller financing?
The seller lets you pay part of the price over time through a promissory note, with agreed interest and repayment terms.
Ready to move forward?
Questions about this step? Email [email protected] and we will point you to the right guide.
BusinessBuy.site provides free educational information, not legal, tax, lending or investment advice. Speak to a qualified accountant, attorney or lender about your deal.