Last reviewed October 19, 2026 · 7 min read
Buying an established business can offer existing customers, cash flow, and staff from day one. Financing an acquisition, however, requires the lender to evaluate two things at once: the business being purchased and the buyer who will run it.
Common financing structures
Many small business acquisitions are financed through the SBA 7(a) program, which can fund goodwill, equipment, inventory, working capital, and owner-occupied real estate in a single loan. Transactions often also include buyer equity and, in some cases, a seller note.
What lenders look at
- Historical cash flow of the target business and whether it supports the proposed debt
- Buyer experience in the industry or in managing a similar operation
- Purchase price relative to earnings, supported by a business valuation where required
- Equity injection and the documented source of the funds
- Transition plan, including any seller involvement after closing
Equity injection and seller notes
Under current SBA rules (SOP 50 10 8.1, effective October 1, 2026), complete changes of ownership generally require an equity injection of at least 10% of total project costs. A seller note can count toward a portion of that requirement — no more than half — only when it is on full standby for the life of the SBA loan. Lenders can and often do require more equity based on the deal.
What to prepare
- A signed letter of intent or purchase agreement
- The seller’s business tax returns and interim financial statements
- Your résumé, personal financial statement, and personal tax returns
- Documentation of your equity injection
- A transition plan and financial projections
Sources
This article is for general educational purposes and is not legal, tax, or financial advice. Sapphire Holdings is not a lender and is not affiliated with the U.S. Small Business Administration. Program rules change; confirm current requirements with your lender.