TurboFunding.com
Buying an existing business is one of the fastest ways to become a business owner. The customer base is already there, the team is in place, and the revenue history tells you what you are actually buying. The hard part is financing the deal. Sellers rarely accept a handshake and a promissory note, and most buyers do not have the full purchase price sitting in a checking account. Understanding your financing options before you sign a letter of intent puts you in a far stronger negotiating position and dramatically shortens the time from offer to close.
This guide walks through how business acquisition loans work, what lenders look for, how seller financing fits into the picture, and the four due diligence items that will make or break your approval. Whether you are buying a small service business for $300K or a mid-market company closer to $3M, the structure of the deal and how you present it to a lender matters just as much as your credit score.
SBA 7(a) Acquisition Loans: The Most Common Path
The SBA 7(a) program is the go-to financing tool for buying an existing business. The maximum loan amount is $5M, and repayment terms for acquisition deals typically run 10 years, though some deals involving real estate can stretch to 25 years. Because the SBA guarantees a portion of the loan, participating banks are willing to extend credit on terms that would otherwise be unavailable to small business buyers. The guarantee reduces the lender's risk, which means lower down payments and longer terms than a conventional commercial loan.
To qualify, the business being acquired generally needs to show at least two to three years of profitable operating history. The buyer typically needs to inject 10 percent of the purchase price in equity, though 15 to 20 percent is more common when the acquisition involves intangible assets like customer lists or goodwill. SBA lenders will also want to see that the buyer has relevant industry experience. Purchasing a dental practice with a background in dentistry is a very different risk profile than buying one as a pure financial investment.
Rates on SBA 7(a) loans float with the prime rate plus a spread. As of mid-2026, all-in rates for acquisition loans typically land between 10 and 13 percent depending on deal size and borrower profile. Fees include a one-time SBA guarantee fee, which can be rolled into the loan amount. The process is thorough and can take 60 to 90 days from application to funding, so build that timeline into your letter of intent and purchase agreement.
Why Seller Financing Changes the Math
Seller financing means the current owner agrees to accept a portion of the purchase price as a promissory note paid over time, rather than cash at closing. A typical structure has the seller carrying 10 to 25 percent of the purchase price at a negotiated interest rate, often in the 6 to 8 percent range. On a $1M acquisition, that could mean the seller takes $150K as a note paid out over five years while the buyer funds the remaining $850K through an SBA loan or other lender.
From a lender's perspective, seller financing is a strong positive signal. When a seller is willing to leave money on the table and accept repayment over time, it suggests they believe the business will continue to generate cash flow after the transition. SBA guidelines allow seller financing to count toward the buyer's equity injection requirement in certain structures, which means less cash out of pocket at closing. That combination of lower equity requirement and demonstrated seller confidence makes approval significantly more likely.
Seller financing also acts as a bridge during ownership transition. Many business buyers worry that customers or key employees will leave when the founder exits. A seller who remains financially tied to the business through a note has a natural incentive to support a smooth transition. Many deals include a consulting or transition agreement alongside the seller note, which gives the buyer six to twelve months of operational knowledge transfer.
The Four Due Diligence Items Lenders Care About Most
Lenders evaluating a business acquisition loan are essentially underwriting two borrowers at once: the buyer and the business being acquired. On the business side, four factors come up in nearly every deal, and weakness in any one of them can kill or significantly restructure an approval.
The first is three years of business tax returns. Lenders want to see actual returns, not internal financials or QuickBooks exports. Tax returns are verified income; internal financials are not. They will look at net income, the trend over three years, and whether reported income is consistent with the revenue numbers the seller is claiming. Large discrepancies between the two are a red flag that either the business is being presented misleadingly or the seller has been managing taxes aggressively, which creates its own problems.
The second is customer concentration. A business where 40 percent of revenue comes from a single client is a very different acquisition risk than one with 200 customers each representing less than 1 percent of revenue. Lenders typically want to see no single customer representing more than 15 to 20 percent of revenue. If concentration exists, expect additional scrutiny on whether contracts are assignable and what the customer relationship actually looks like with the founder.
The third is lease assignability. If the business operates out of a physical location, the lender will want to know whether the lease can be assigned to the new owner and how many years remain. A business with three years left on a lease in a high-traffic location with a landlord who has not agreed to assignment is a materially different risk than one with a 10-year lease already approved for transfer. Pull the lease early and confirm assignability with the landlord before you get deep into diligence.
The fourth is add-backs. Sellers often run personal expenses through the business, which depresses reported income but does not reflect what a new owner would actually earn. Common add-backs include owner salary above market rate, vehicle expenses, personal travel, and one-time charges. Lenders will review the seller's discretionary earnings calculation and may accept some add-backs and reject others. Work with an accountant or business broker to build a clean, defensible add-back schedule before presenting it to a lender.
How TurboFunding Helps
TurboFunding works with buyers who are in the middle of an acquisition and need financing that matches the timeline of the deal. Our funding range runs from $10K to $5M, covering everything from a small service business acquisition to a larger commercial deal. We require a 550+ FICO score, at least $10K in monthly revenue from the business being acquired or the buyer's existing operations, and a minimum of six months in business. The application takes about three minutes and uses a soft credit pull only, so checking your options will not affect your score. If you have signed a letter of intent and need to understand what financing looks like before the purchase agreement is finalized, that is exactly the right time to apply. Find out More
Frequently Asked Questions
Q. What credit score do I need to get a loan to buy a business?
A. Most SBA lenders want to see a personal credit score of 650 or above, though some conventional SBA lenders prefer 680 or higher. Alternative lenders like TurboFunding work with buyers at 550+. The credit score is just one input; industry experience, cash injection, and the strength of the business being acquired all factor in.
Q. How much of a down payment is required for a business acquisition loan?
A. SBA 7(a) deals typically require 10 to 20 percent of the purchase price as an equity injection from the buyer. Seller financing can often count toward this requirement. On a $500K acquisition, plan to have at least $50K to $75K in cash available, and more if the deal involves significant goodwill.
Q. Can I use an SBA loan to buy a franchise?
A. Yes. SBA 7(a) loans are commonly used for franchise acquisitions, including both new franchise locations and the purchase of an existing franchisee's unit. The franchisor must be on the SBA's franchise directory for the loan to qualify, which most major franchises already are.
Q. How long does it take to close a business acquisition loan?
A. SBA 7(a) loans typically take 60 to 90 days from a complete application to funding. Alternative lender timelines can be faster, sometimes 2 to 4 weeks, but the underlying diligence on the acquired business still takes time regardless of the lender. Build at least 90 days into your purchase agreement for the financing contingency.
Buying an existing business is a serious transaction, and the financing structure you put in place shapes everything from your monthly cash flow to the risk you carry on day one of ownership. The buyers who close deals successfully come in prepared with clean financials, a realistic view of the business's earnings, and a lender aligned to the deal size and timeline. Whether you are pursuing an SBA 7(a) acquisition loan, negotiating seller financing, or exploring alternative lending options, getting your documentation in order early is the single biggest factor in closing on time. When you are ready to explore what financing is available for your deal, Find out More.