How lenders look at an acquisition
The target's historical cash flow is the primary security, so underwriting starts with the seller's tax returns rather than the buyer's. Lenders test whether the business's earnings cover the new debt service with a margin - commonly 1.25× or better - after paying the buyer a reasonable salary.
The buyer's relevant industry experience carries genuine weight here, more than in almost any other lending decision. A first-time buyer entering an unfamiliar trade is a materially harder credit than an operator buying a competitor.
Equity injection and seller notes
SBA rules require an equity injection of at least 10% of total project cost on a change of ownership. A seller note can count toward part of that requirement only if it is fully standby - no payments of any kind for the life of the SBA loan - which is a much harder thing to negotiate than it sounds.
Deals commonly fail at exactly this point, when a seller who agreed to 'hold paper' discovers what full standby means.
Asset purchase versus stock purchase
Most SBA-financed acquisitions are asset purchases, which leave the seller's liabilities behind and give the buyer a stepped-up basis. Stock purchases are financeable but raise successor-liability questions that lenders scrutinise closely. The choice has significant tax consequences on both sides and is a question for a transaction attorney and an accountant, not a website.
Commonly used for
- Buying a profitable business with verifiable financials
- Partner buyouts
- Operators expanding by acquiring a competitor
What to check before signing
- A seller note only counts toward the equity injection if it is on full standby for the loan's life
- Business valuations are required and can come in below the agreed price, breaking the deal
- Goodwill-heavy deals face additional scrutiny
- Personal guarantees from all 20%-plus owners are standard
What the record shows
Real SBA numbers, not estimates
Every figure below is computed from the SBA's own loan-level file rather than from a lender's marketing.
Loans since FY2010
1,052,071
Median approval
$180,000
Median 7(a) rate
6.75%
Median term
10 yr
Source: U.S. Small Business Administration, SBA 7(a) and 504 FOIA data, as of 2026-06-30. Approvals from FY2010 onward. How we calculate this.
| Largest SBA lenders | Approved | Loans | Median loan |
|---|---|---|---|
| Live Oak Banking Company | $23.10B | 17,770 | $850,000 |
| The Huntington National Bank | $19.51B | 82,278 | $60,700 |
| Wells Fargo Bank | $17.43B | 56,773 | $25,000 |
| U.S. Bank | $10.67B | 43,737 | $40,000 |
| JPMorgan Chase Bank | $8.49B | 44,082 | $95,000 |
Acquisition: common questions
- How much money do I need to buy a business with an SBA loan?
- Plan on at least 10% of total project cost as equity, plus closing costs and working capital after the deal. Lenders also want to see reserves left over - a buyer who puts in their last dollar is a weaker credit than one who does not.
- Can I use a seller note as my down payment?
- Partially, and only on full standby terms - the seller receives no payments at all while the SBA loan is outstanding. Sellers frequently decline once they understand this.