Structure Your Business Acquisition
Lay out the price, your cash, the seller note and any investors. The builder sizes the SBA loan, counts which sources meet the 10% Down Payment, tests debt coverage and gives you a plain-English list of what works and what needs fixing under the SBA rules.
How The Builder Reads Your Deal
Each line in the checklist comes from SBA SOP 50 10 8.1, Appendix 15, which governs every 7(a) change of ownership for applications received on or after October 1, 2026.
Total project cost
Price, working capital, closing costs and the guaranty fee if financed. The 10% Down Payment is measured on this, not on the price alone.
Which sources count
Your cash and cash from owners of 20% or more count in full. A seller note on full standby and investors under 20% count for up to half of the Down Payment, combined.
The SBA loan
Project cost minus your cash, investor money and the seller note. One 7(a) loan caps at $5 million; above that the builder adds a companion conventional loan, pari passu.
Term
Up to 10 years for the business. With real estate, a blended term weights only the real estate at up to 25 years, or the lender splits it into two loans.
Debt coverage
Cash flow after salary, divided by every annual payment, including a seller note that is not on full standby. SBA requires at least 1.25x for an acquisition.
Valuation and diligence
Debt cannot exceed what the valuation supports; any gap is equity. A business purchase price of $3 million or more needs a Quality of Earnings report.
Example: A $2.5 Million Service Business
The default numbers in the builder. The buyer brings $155,000, the seller carries a $125,000 note on full standby, and the loan finances $150,000 of working capital and $50,000 of closing costs.
- Project before the fee is $2,700,000. With the guaranty fee financed it is about $2.77 million, so the Down Payment needed is about $277,000.
- The $125,000 standby note is under half of that, so all of it counts. Your $155,000 covers the rest, with a few thousand to spare.
- The SBA loan is about $2.49 million on a 10-year term. Add your quoted rate to see whether $500,000 of cash flow after salary covers it 1.25 times.
Common Fixes When A Deal Falls Short
- Move the seller note to full standby so it counts toward the Down Payment
- Ask the seller for more of the price as a standby note, up to half of the Down Payment
- Bring in a minority investor under 20%, or a partner who will guarantee
- Negotiate the price down to the valuation
- Leave some working capital to a line of credit instead of the term loan
- Above $5 million, use a pari passu conventional loan alongside the SBA loan
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Frequently Asked Questions
How do I structure an SBA business acquisition?
Start with the total project cost: price, working capital, closing costs and the SBA guaranty fee. Cover at least 10% with your Down Payment, using a seller note on full standby or minority investors for no more than half of it. The SBA loan covers the rest up to $5 million, and the business’s cash flow must cover every payment at least 1.25 times.
Can a seller note on partial standby count toward the Down Payment?
Not under SOP 50 10 8.1. Only seller debt on full standby, with no principal or interest payments for the term of the SBA loan, counts as equity. A note on standby for 24 months is still a useful part of the deal, but it is debt, not Down Payment, and its payments must fit in the cash flow.
How long can the loan be if real estate is included?
The business portion amortizes over up to 10 years. When the building is part of the purchase, the lender can make separate loans (up to 25 years on the real estate) or one blended loan whose term is the weighted average, with only the real estate share at up to 25 years and everything else at 10.
Do investors have to guarantee the loan?
Anyone who owns 20% or more of the buyer must give an unlimited personal guaranty. Investors under 20% who do not control the business do not have to, and their cash counts toward the Down Payment as a limited source.
What if the price is higher than the business valuation?
The loan cannot cover the gap. The difference between the price and the valuation must be made up by additional equity, which can include more seller debt on full standby.
When is a Quality of Earnings report required?
When the business purchase price, not counting owner-occupied real estate, is $3 million or more on an initial acquisition. It must be independent and done for the lender, not the seller.
What does the SBA guaranty fee cost?
The maximum upfront fee in SOP 50 10 8.1 is a percentage of the guaranteed portion: 2% on loans of $150,000 or less, 3% up to $700,000, and above that 3.5% on the first $1 million guaranteed plus 3.75% on the rest. SBA can change fees for a fiscal year by notice, so your lender confirms the exact amount.
Can I share my deal structure with my partner or broker?
Yes. Use Copy Summary to copy a plain-text summary with a link that reopens the builder with the same numbers.
Keep Planning Your Acquisition
Also see: Closed Deals · Top SBA Lenders · SBA Calculators · Pre-Qualification Letter
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