How to Buy a Business with an SBA Loan

The SBA 7(a) program is the primary lending vehicle for small business acquisitions in the United States. With loan amounts up to $5 million, down payments as low as 10%, and terms up to 10 years (25 years if real estate is included), SBA financing makes business ownership accessible to qualified buyers.

The process begins with identifying a target business and obtaining preliminary financials for evaluation. Key metrics include seller's discretionary earnings (SDE), EBITDA, revenue trends, customer concentration, and owner dependency. Lenders typically value businesses at 2x to 4x SDE depending on industry, size, and growth trajectory.

Once you've identified a target and agreed on preliminary terms with the seller, your broker or lender will guide you through the SBA application process. Key requirements include a business plan, financial projections, personal financial statements, credit authorization, and relevant industry experience. The SBA requires that buyers inject at least 10% equity into the transaction.

Working with a broker experienced in SBA acquisition financing can significantly improve your chances of approval and help you work through the complexity of business valuation, deal structure, and lender matching.

Frequently Asked Questions