How Business Acquisition financing works
Business acquisitions are commonly financed through the SBA 7(a) program, which can cover goodwill, equipment, inventory, working capital, and owner-occupied real estate in a single loan. Conventional bank financing and seller financing may also play a role depending on the transaction.
Lenders typically focus on the historical cash flow of the target business, the buyer's relevant experience, the reasonableness of the purchase price, and the buyer's equity injection. Under current SBA rules (SOP 50 10 8.1, effective October 1, 2026), changes of ownership generally require a minimum equity injection of 10% of total project costs, and a seller note may count toward no more than half of that injection only if it remains on full standby for the life of the SBA loan. SBA also places increased emphasis on historical cash flow for acquisitions. Lenders may require more.
Common business uses
- Purchasing 100% of an existing business (asset or stock purchase)
- Partner buyouts and partial changes of ownership, as permitted by program rules
- Acquiring the business's real estate as part of the transaction
- Post-closing working capital to support the transition
- Transaction-related costs, as permitted by the lender
General eligibility considerations
- Buyer has relevant industry or management experience
- Target business demonstrates historical cash flow sufficient to support debt service
- Purchase price is supported by financial performance and, where required, an independent business valuation
- Buyer can provide the required equity injection from eligible sources
- Buyer and business meet SBA eligibility and ownership requirements where SBA financing is used
Documentation lenders typically request
- Letter of intent or purchase agreement
- Seller's business tax returns and interim financial statements (typically three years)
- Buyer's personal tax returns, personal financial statement, and résumé
- Documentation of the source of the buyer's equity injection
- Business plan or transition plan with projections
- Details of any seller financing or earn-out arrangements
- Lease or real estate information for the business location
Requirements vary by lender and program. Please do not send tax returns or other sensitive documents through our website form — we will provide a secure method when documents are needed.
The role Sapphire Holdings plays
- Help you organize seller financials, buyer information, and deal terms
- Help prepare a clear narrative of the transaction, the business, and your transition plan
- Help identify lenders active in acquisition financing
- Help coordinate lender requests among buyer, seller, and advisors
Sapphire Holdings is not a lender and does not make credit decisions. The lender independently determines eligibility, rates, terms, and approval.