Which funding products does this apply to?

Term Loan, SBA Loan. Each has its own page listing the funders in this directory that offer it and what each one publishes about its terms.

Is this specific to restaurants?

It is written around how a restaurant business actually generates and collects cash, which is what makes its funding problem different. The mechanics transfer; the arithmetic may not.

The Find Me Funders research desk. Some drafting is AI-assisted, and every page that is says so at the top, including whether a person has checked its claims yet.

How do I know a figure here is right?

Where a page carries the green notice, its claims were checked against the sources listed at the end and a reviewer is named. Where it carries the amber one, nobody has verified it yet and you should confirm anything you plan to act on.

Are the examples real deals?

No. Every worked example is labelled illustrative and exists to show the arithmetic. What any particular lender charges is on that lender's page, where it publishes it.

Why do you never say what a typical rate is?

Because we cannot source it. A market average assembled from lenders who do not publish prices is a guess with a decimal point on it. Where a lender publishes a figure, we show that figure and say where it came from.

Is this financial or legal advice?

No. It is general information about how these products work. Outcomes depend on your contract and your state, and a lawyer or accountant licensed where you are is the person to ask about your situation.

Can I reuse this content?

Quote a paragraph with a link back. Do not republish whole articles.

Using an SBA loan to buy a business: how it is underwritten

Using an SBA loan to buy a business

Acquisition is one of the programs' main uses. The underwriting is a different exercise from a working capital request, and it moves on the seller's numbers as much as yours.

By Find Me Funders research desk Updated 14 September 2026 1058 words 5 min read

Drafted with AI assistance. Not yet independently checked. Nobody has verified the claims on this page against a source, so treat the figures and legal points as a starting point rather than as settled, and confirm anything you are about to act on. How we check things.

Can I use an SBA loan to buy a business?

Yes — business acquisition is one of the most common uses of a 7(a) loan, including buying real estate and equipment as part of the same purchase. Underwriting differs from a working capital request: it runs on the target's historical cash flow rather than yours, requires an equity injection set by SBA rule, usually needs an independent business valuation once the financed intangible amount crosses a threshold, and pulls in the seller through a purchase agreement and often a standby note. Partial buyouts of existing owners are possible under conditions in the current SOP.

The program finances change of ownership regularly, and a profitable business with clean records is one of the easier things an SBA lender underwrites.

How acquisition underwriting differs from working capital

The cash flow being tested is the target's.For a working capital loan, the lender analyzes your business's history. For an acquisition, it analyzes the business you are buying — historical earnings, adjusted for owner compensation and non-recurring items — and asks whether that cash flow covers the new debt service with a margin. SBA rules set a minimum coverage for some transactions, and lenders set their own above it.

The seller is part of the file.The lender wants the seller's tax returns, financial statements, and an explanation of any gap between the two. A seller who will not produce records ends the deal, and the reason is usually visible in the records they will not produce.

A valuation is generally required.Where the financed amount attributable to goodwill and other intangibles crosses a threshold set in the SOP, an independent business valuation by a qualified source is required, and the loan is sized against that value rather than against the agreed price. If you overpay, the gap comes out of your pocket.

Your injection is calculated on the project.Change of ownership carries a required contribution set by SBA rule. A seller note on full standby can sometimes cover part of it, subject to conditions on the standby period and the share. Get the standby language into the purchase agreement, not bolted on afterwards.

Structure has consequences.Asset purchase and stock purchase are treated differently for eligibility, liability and tax. Decide with an advisor early, because it affects the loan documents.

Partial buyouts are possible.Buying out one partner while others remain is permitted under conditions in the current SOP, including requirements about the remaining owners and the business's balance sheet after the transaction. Confirm the current conditions at sba.gov.

The coverage arithmetic, worked

Illustrative only, with a placeholder rate and term rather than any lender's actual quote —a target reporting $118,000 of net income. Add back the owner's compensation above what a manager would cost ($65,000), depreciation ($34,000), a one-off legal matter ($12,000) and a personal vehicle running through the business ($9,000). Adjusted earnings are $238,000.

You will need a salary. At $110,000, the cash available for debt service is $128,000.

At a price of $950,000 with a 90% loan, the borrowing is $855,000. Over ten years at a placeholder 10%, that is $11,299 a month, or $135,587 a year. Coverage is 0.94 — the business does not cover its own debt service, and no lender writes that.

Drop the price to $800,000. The loan is $720,000, the payment $9,515 a month, $114,178 a year, and coverage is 1.12.

Two things follow. The price, not the financing, is what fails or passes this test — the same business at two prices produces two different deals. And the size of your own salary is an input, which is why a buyer who plans to draw heavily in year one should model that before agreeing a number, not after.

Run this calculation yourself on the seller's figures before you sign anything binding. It takes fifteen minutes and it tells you what the business can afford to be bought for, which is a more useful number than what it is being offered at.

What the lender will look for in you

Industry and management experience, weighted heavily. Personal credit and a personal financial statement from every owner above the guarantee threshold. Cash for the injection, sourced and seasoned. A plan for the transition — customer retention, key staff, supplier relationships, and what the seller does after closing.

Add-backs, and which ones survive

The adjusted earnings figure is where acquisitions are won and lost, and the broker's version is not the lender's version.

Usually accepted, with evidence.Owner compensation above a market replacement salary. Depreciation and amortisation. Interest on debt that will not survive the sale. One-off legal or professional costs with an invoice behind them. Personal expenses run through the business where they appear clearly on the return — a vehicle, a phone, a family member on payroll who does not work there.

Usually challenged.Add-backs with no document. "Cash sales not deposited", which is an admission rather than an adjustment. Rent below market paid to an entity the seller owns, unless the lease transfers on the same terms and is documented. Cost savings you intend to make after closing — those are your plan, not the target's history.

The one to watch.A departing owner who did the selling, the estimating or the key relationship work, replaced in your model by nobody. If the market salary add-back assumes a $100,000 manager replaces a founder who personally held the top three accounts, the earnings you are buying may not be there in year two.

Ask the lender early which add-backs it will accept and what evidence it wants for each. The gap between the broker's adjusted figure and the lender's is frequently the whole equity injection.

The timeline problem

Acquisitions add steps: the valuation, the seller's documentation, the purchase agreement, often real estate with an appraisal and environmental report, sometimes a lease assignment and a landlord who does not answer email.

Two practical moves. Build a financing contingency and a realistic timeline into the purchase agreement, with an extension mechanism. And get the lender looking at the target's financials before the agreement is signed, because a business whose earnings will not support the price is better discovered in week one.

Questions to answer before you apply

What are the target's adjusted earnings, and what adjustments are you making?
What is the price relative to those earnings, and would a valuation support it?
What is the required injection, and where is your cash coming from?
Is the seller willing to hold a note, and on standby terms?
Does the deal include real estate, and does it meet the occupancy requirement?
Is the seller staying on, for how long, and paid how?
What happens to the key employees and the top customers when the owner leaves?

The last one is not a financing question, but it is the one that decides whether you can repay.