The short answer
The standard route to buying an existing business is an SBA 7(a) acquisition loan: published guides describe up to 90% financing, a 10% equity injection, and terms up to 10 years. The common structure is 80% SBA loan, 10% buyer equity, 10% seller note, with the seller note often standing in for part of the down payment.
How Does an Acquisition Loan Actually Work?
Acquisition lending underwrites the target business, not just the buyer: the cash flow being purchased must cover the debt service with room to spare. That is why the published SBA 7(a) structure dominates small acquisitions: government guaranty makes banks comfortable lending against cash flow with only hard-asset partial coverage.
The published shape per SBA lending guides: up to 90% financed, a 10% equity injection from the buyer, terms up to 10 years for business-only acquisitions and up to 25 years when real estate is included, at the SBA's published Prime-plus rate caps.
| Piece | Typical published structure |
|---|---|
| SBA 7(a) loan | About 80% of purchase price |
| Buyer equity | 10% minimum injection per published SBA guides |
| Seller note | Often 10%, on standby terms so it can count toward the injection |
| Term | Up to 10 years business-only; 25 with real estate |
| Rate | SBA published caps: Prime plus 2.25% to 4.75% by size |
What Does a $500,000 Acquisition Look Like in Numbers?
Take a business selling for $500,000 on the published 80-10-10 shape: a $400,000 SBA loan, $50,000 buyer cash, and a $50,000 seller note on standby.
At 10.5% over 10 years, inside the current published cap range, the SBA payment runs about $5,400 a month, roughly $148,000 in total interest. If the business genuinely produces, say, $180,000 of annual owner earnings, debt service consumes about 36% of it, a coverage level lenders generally accept.
The seller note is the underrated piece: published guides describe standby structures with no payments for the first year or two, and a seller who accepts one is signaling belief in the business they are handing you.
When Is the SBA Route the Wrong Path?
Speed kills SBA deals: published timelines run 30 to 90 days, and a seller with competing offers may not wait. Small acquisitions can suffocate under the documentation burden. Buyers with substantial assets sometimes do better on conventional terms without SBA fees. And some deals should not be financed at all: a business whose earnings depend entirely on the departing owner is buying a job, not an asset, and no loan structure fixes that. Heavy seller financing, half or more carried by the seller, is often the honest structure for those.
How Do You Prepare a Fundable Acquisition?
Lenders approve prepared buyers; the checklist is knowable in advance.
- Three years of the target's financials and tax returns; earnings must be provable, not narrated
- Your side: credit in the tier banks publish, the 10% injection documented and seasoned
- A debt service coverage calculation the lender will accept, run before you offer
- Negotiate the seller note early; its standby terms affect your required cash
- Industry experience matters to underwriters buying cash flow; document yours
Commonly Asked Questions
- How much down payment does buying a business take?
- Published SBA guides describe a 10% minimum equity injection for complete changes of ownership, and part of it can often be covered by a properly structured standby seller note. Conventional acquisition lending typically wants more.
- What interest rate do acquisition loans carry?
- SBA 7(a) acquisition loans price inside the SBA's published caps, Prime plus 2.25% to 4.75% depending on size, roughly 9% to 11.5% APR at 2026 Prime levels. Conventional and alternative routes price by risk from there.
- Can I buy a business with its own cash flow?
- That is precisely what acquisition lending is: the target's provable earnings service the debt. The buyer still brings the published 10% injection and personal credit; the business brings the repayment.
- Does Batch Capital fund acquisitions?
- Batch Capital works acquisition-adjacent funding, working capital at close, equipment, and growth capital after transition, and helps buyers structure the file lenders want to see. Merchant-account buyers of processing portfolios use the same disciplines our Sub ISO content covers.
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