Biggest Mistakes SBA Buyers Make (And How to Avoid Them)

SBA Business Acquisition Mistakes That Cost Buyers Thousands

Buying a business with an SBA loan is one of the smartest paths to business ownership. With as little as 10% down, favorable interest rates, and 10-year repayment terms, SBA financing makes business acquisition accessible to qualified buyers who might not have millions in cash sitting in the bank.

But the SBA loan process is complex, and the stakes are enormous. A single mistake — applying to the wrong lender, structuring the deal incorrectly, or underestimating your cash needs — can cost you the deal entirely or saddle you with terms that make the acquisition financially painful for years.

At GoSBA Loans, we’ve facilitated over $320 million in SBA-financed acquisitions in 2025 alone. We’ve seen every mistake in the book — and we’ve helped hundreds of buyers avoid them. Here are the biggest mistakes SBA buyers make, and exactly how to avoid each one.

Mistake #1: Going to One Bank Instead of Shopping Lenders

This is arguably the most expensive mistake SBA buyers make — and it’s incredibly common.

Why Buyers Make This Mistake

• They have an existing relationship with a bank and assume that bank will offer the best deal
• They don’t realize that SBA lending terms vary significantly between lenders
• They think the SBA sets all the terms (it doesn’t — the SBA sets guidelines, but individual lenders set rates, fees, and additional requirements)
• They don’t want to deal with multiple applications

What This Mistake Costs You

Different SBA lenders offer dramatically different terms on the same deal:

• Interest rates: Can vary by 0.5% to 1.5% between lenders — on a $1 million loan over 10 years, that’s tens of thousands of dollars
• Equity injection requirements: Some lenders require 10% down, others want 15-20% for certain deal types
• Industry appetite: Some lenders love restaurants; others won’t touch them. Some specialize in manufacturing; others focus on service businesses
• Speed: Closing timelines range from 30 days to 90+ days depending on the lender
• Additional collateral requirements: Some lenders require personal real estate as additional collateral; others don’t
• Approval likelihood: A deal that gets denied at one bank might get enthusiastically approved at another

How to Avoid It

Work with an SBA loan broker who can simultaneously submit your deal to multiple lenders. At GoSBA Loans, we have a network of 50+ SBA lenders, and we match each deal with the lenders most likely to approve it at the best terms. Instead of applying to one bank and hoping for the best, we create competition for your deal.

Mistake #2: Not Getting Pre-Qualified Before Making Offers

Too many buyers find a business they love, sign a letter of intent, put down earnest money, spend thousands on due diligence — and then discover they can’t get SBA financing.

Why Pre-Qualification Matters

• It establishes your buying power: You’ll know exactly how much business you can afford before you start shopping
• It identifies potential issues early: Credit problems, industry restrictions, or deal structure issues are better discovered before you’ve invested time and money
• It strengthens your offer: Sellers and business brokers take pre-qualified buyers far more seriously
• It speeds up closing: Pre-qualified buyers can close weeks faster because much of the lender’s work is already done

What Pre-Qualification Involves

• Review of your personal credit and financial situation
• Assessment of your management experience and qualifications
• Preliminary review of the target business’s financials (if you have a specific deal)
• Identification of the best SBA loan program for your situation (7(a) vs. 504)
• Estimate of your equity injection requirement

How to Avoid This Mistake

Get pre-qualified before you start seriously looking at businesses. At GoSBA Loans, pre-qualification is fast, free, and doesn’t affect your credit score. We’ll tell you exactly where you stand and what you need to do to be ready when the right deal comes along.

Mistake #3: Underestimating Working Capital Needs

You’ve budgeted for the down payment, the closing costs, and maybe a small reserve. But have you budgeted for the cash you’ll need to actually run the business from day one?

Working Capital Surprises That Catch Buyers Off Guard

• Payroll: Employees expect to be paid on schedule. If the business has $50,000/month in payroll, you need that cash immediately
• Inventory restocking: Many sellers run down inventory before the sale. You may need to invest $50,000-$200,000 in inventory on day one
• Accounts receivable timing: You own the business, but customer payments for work completed before closing may still go to the seller
• Rent and deposits: New lease terms may require additional security deposits
• Insurance: Business insurance, workers’ comp, and liability coverage often require upfront premium payments
• Revenue dip: It’s common for revenue to temporarily decline by 10-20% during the ownership transition period

How to Avoid It

• Include working capital in your SBA loan: This is one of the most underutilized strategies in SBA acquisitions. Most lenders will finance working capital as part of the deal
• Build a detailed cash flow projection for the first 12 months, including all operating expenses
• Maintain personal reserves of at least 3-6 months of the business’s fixed costs
• Negotiate working capital provisions in the purchase agreement — specify minimum inventory levels, accounts receivable treatment, and accounts payable responsibility

Mistake #4: Skipping the Business Plan

Many SBA buyers view the business plan as a bureaucratic checkbox — something they need to produce for the lender but nothing more. This mindset is wrong, and it costs them.

Why the Business Plan Actually Matters

• It’s required by SBA lenders: Every SBA acquisition loan requires a business plan with financial projections. A weak plan can delay or kill your approval
• It forces you to think critically: Writing a plan forces you to articulate how you’ll run the business, grow revenue, manage expenses, and handle challenges
• It serves as your roadmap: The best business plans become operational guides for the first 1-3 years of ownership
• It identifies gaps: The process of writing projections often reveals cash flow gaps, unrealistic assumptions, or operational challenges you hadn’t considered

What SBA Lenders Want in a Business Plan

• Executive summary: Overview of the acquisition, business description, and your qualifications
• Industry and market analysis: Understanding of the competitive landscape
• Management plan: How you’ll operate the business, your relevant experience, and your team
• Financial projections: 3-5 year projections showing revenue, expenses, cash flow, and debt service coverage
• Use of funds: Detailed breakdown of how loan proceeds will be used

How to Avoid This Mistake

Don’t try to write your business plan from scratch using a generic template. SBA lenders have specific expectations, and a plan that doesn’t address their concerns will slow down your approval. At GoSBA Loans, we provide every client with a professional business plan and financial projections — a service worth $2,500-$5,000 — completely free. Our plans are tailored to SBA lender expectations and designed to maximize your approval chances.

Mistake #5: Not Understanding Seller Note Standby Requirements

Seller financing is a component of most SBA business acquisitions, but the rules around seller notes in SBA deals are often misunderstood — by both buyers and sellers.

How Seller Notes Work in SBA Deals

In a typical SBA acquisition:

• The SBA lender finances 75-80% of the purchase price
• The buyer contributes 10-15% as equity injection (down payment)
• The seller carries 10-15% as a seller note

The Standby Requirement

Here’s where buyers (and sellers) get tripped up: SBA lenders typically require the seller note to be on “full standby” for at least 24 months. This means:

• No principal or interest payments on the seller note during the standby period
• The seller note is subordinate to the SBA loan in all respects
• The seller cannot demand payment, accelerate the note, or take any collection action during standby

Many sellers don’t understand this or aren’t willing to accept it. If the seller insists on receiving payments from day one, the deal structure may not work for SBA financing.

Common Problems

• Seller refuses standby terms: The deal falls apart because the seller won’t wait 2 years for payments
• Buyer doesn’t disclose the seller note terms to the lender: This is a serious compliance issue that can result in loan recall
• Seller note terms conflict with SBA requirements: Interest rates, payment schedules, or security provisions that violate SBA guidelines

How to Avoid It

• Discuss seller note expectations with the seller early in negotiations — before signing an LOI
• Work with an SBA broker who can explain standby requirements to both you and the seller
• Ensure your purchase agreement specifically addresses SBA-compliant seller note terms
• Consider offering the seller a slightly higher total price in exchange for favorable standby terms

Mistake #6: Trying to Do It All Yourself

The final — and perhaps most impactful — mistake is trying to navigate the SBA acquisition process without experienced guidance.

What You’re Up Against

• SBA regulations are complex: The SBA Standard Operating Procedures manual is over 400 pages long
• Every deal is different: Industry, business size, deal structure, buyer qualifications, and geographic location all affect how the deal should be structured
• Lender relationships matter: Knowing which lender is the right fit for your specific deal is worth thousands of dollars and weeks of time
• Mistakes are expensive: A deal that falls apart after months of due diligence costs you time, money, legal fees, and the opportunity cost of not pursuing other deals

Why Using a Broker Like GoSBA Eliminates Most of These Mistakes

Working with an experienced SBA loan broker like GoSBA Loans addresses virtually every mistake on this list:

• Lender shopping: We submit your deal to our network of 50+ lenders — you get the best terms available, not just whatever your local bank offers
• Pre-qualification: We pre-qualify you before you waste time and money on deals that won’t get approved
• Working capital planning: We help you structure the deal to include adequate working capital from day one
• Business plan: We provide a professional business plan and financial projections (worth $2,500-$5,000) at no cost
• Seller note structuring: We help structure seller notes that satisfy both the seller and SBA requirements
• Deal guidance: From LOI to closing, we guide you through every step and flag potential issues before they become deal-killers

And here’s the best part: our service is 100% free to borrowers. We’re compensated by the lender at closing. You get expert guidance and access to 50+ lenders without paying a dime.

Stop Making These Mistakes — Get Expert Help for Free

Every mistake on this list is preventable. Every single one. The buyers who succeed with SBA acquisitions aren’t necessarily smarter or more experienced — they just have better guidance.

With over $320 million funded in 2025, GoSBA Loans has the experience, lender relationships, and deal expertise to help you avoid every mistake on this list and close your acquisition with confidence.

Ready to do this the right way? Contact GoSBA Loans today for a free, no-obligation consultation. We’ll review your situation, pre-qualify you for SBA financing, and guide you through every step of the acquisition process — all at zero cost to you.