PROFITTHEORY

SBA acquisition loans

Using an SBA loan to buy an existing business

SBA 7(a) loans are a common way to finance a business purchase. The lender sizes the loan to the target's historical cash flow, expects buyer equity (sometimes partly from a seller note on standby), and looks for an experienced buyer with a transition plan.

Plan my acquisition with your financing specialist Check your debt coverage

Estimates only. Results vary. No guarantee of approval, rates or savings.

Profit Theory is not a lender. Providers make all funding decisions; approval is never guaranteed.

How the deal is underwritten

The lender reviews the seller's tax returns, adjusts for owner compensation and one-time items, and checks whether the remaining cash flow covers the new debt with a cushion. A purchase price far above what cash flow supports usually means renegotiating or adding equity.

Structure

Typical sources:

  • Senior SBA loan
  • Buyer cash equity
  • Seller note — sometimes on full standby to count toward equity
  • Working capital built into the loan

Run the numbers

Blue = you enterGreen = calculatedGray = assumptionAmber/red = check this
$

Net income + interest + depreciation/amortization + documented add-backs.

$
$
$
%
years
x

Debt service coverage (DSCR)

2.64x

Meets your 1.25x target.

Debt / EBITDA

2.17x

New annual payments

$77,639

Max new loan at 1.25x

$1,313,781

Each lender calculates cash flow and coverage its own way. Educational estimate, not a credit decision.

Build my financing planOr talk it through with your financing specialist →

Estimates only. Results vary. No guarantee of approval, rates or savings.

Estimates only. Results vary. No guarantee of approval, rates or savings.

Talk with a financing specialist

Common questions

How much down do I need?

Equity requirements vary by lender and deal. Around 10% is common on SBA acquisitions, but confirm with the lender.

Can the SBA finance goodwill?

Yes, acquisitions often include goodwill. Lenders may require additional collateral when hard assets are limited.

Should I get financing before an LOI?

Getting a lender's read on a deal early helps you avoid overpaying. Your financing specialist can help you test the numbers first.