Loans for Buying a Business: The Buyer's Guide

To buy an existing business in the US, most buyers combine three layers of capital: an SBA 7(a) acquisition loan (the core, typically 70-90% of the purchase price), a seller note (often 5-15% carried by the seller), and buyer equity (usually 10% or more of the deal). The SBA 7(a) program is the default acquisition vehicle because it lets a qualified buyer purchase a profitable business with far less cash down than a conventional bank loan, and it can fund goodwill — the intangible value most business sales are built on. Conventional bank acquisition loans, ROBS (using retirement funds), and all-seller financing round out the options. What almost none of these products cover well is the working capital gap after the keys change hands — payroll, inventory, and receivables while you stabilize the business — and that is where a revenue-based funding marketplace becomes the practical companion to the acquisition loan itself.

The Three-Layer Capital Stack for Buying a Business

Acquisition financing is almost never a single loan. Underwriters and sellers expect the purchase price to be assembled from distinct layers, each carrying different risk and cost:

• Senior debt (the acquisition loan). Usually an SBA 7(a) loan or a conventional bank term loan. This is the largest slice — commonly 70% to 90% of the price on SBA deals — and it is secured by business assets, personal guarantees, and often the buyer's home equity.
• Seller financing (the seller note). The seller carries a portion of the price as a note you pay back over time. SBA rules often require or reward a seller note on standby (no payments for a period), because it keeps the seller invested in a smooth handoff. Typical range is 5% to 15% of the price.
• Buyer equity (your cash in). The SBA generally wants to see at least 10% equity injection on a change-of-ownership deal, and up to half of that can sometimes come from a seller note on full standby. Conventional lenders usually want more — 20% to 30%.

The reason this matters for planning: the senior loan funds the purchase, not the operation. Buyers routinely close the deal fully financed and then discover they have no cushion for the first few payroll cycles. Deciding upfront which layer covers post-close working capital is the single most important underwriting decision a buyer makes.

SBA 7(a): The Default Acquisition Loan

The SBA 7(a) program is the workhorse of US business acquisitions for deals roughly between $150,000 and $5 million. It is a bank loan partially guaranteed by the Small Business Administration, which is why lenders will accept lower down payments and finance intangible goodwill.

What makes it fit acquisitions:

• Terms up to 10 years for a business purchase (25 years if significant real estate is included), which keeps the monthly payment low relative to cash flow.
• Rates are typically tied to the prime rate plus a spread, so they move with the market but stay far below alternative-finance pricing.
• It can fund goodwill, equipment, inventory, and a working-capital cushion in the same loan — if you structure it that way at application.

What buyers underestimate: the timeline. From letter of intent to funding, an SBA 7(a) acquisition commonly runs 60 to 90 days, sometimes longer, because the lender must underwrite both you and the target business, order a third-party business valuation, and clear SBA eligibility. Sellers get impatient, and working capital needs do not wait. Build the calendar into your offer.

The Other Acquisition Options

SBA is not the only path, and for some buyers it is the wrong one. The realistic alternatives:

• Conventional bank acquisition loan. Faster and less paperwork than SBA, but the bank wants strong collateral, a larger down payment (often 25%+), and usually will not finance much goodwill. Best for asset-heavy businesses or well-capitalized buyers.
• Seller financing (majority or all). Some sellers will carry most or all of the price, especially when retiring or when the business is hard to finance conventionally. Cheaper to close, faster, and it aligns the seller with your success — but expect a shorter payback and a personal guarantee.
• ROBS (Rollover for Business Startups). Lets you fund the equity injection from a 401(k) or IRA without early-withdrawal penalties. Powerful for the down payment, but it puts retirement savings at risk and requires careful compliance.
• Revenue-based funding / MCA marketplace. Not a tool to buy the business, but the practical tool to run it right after close, because approval is based on the acquired business's bank deposits and revenue rather than a fresh credit build. More on where this fits below.

For a fuller comparison of financing types across the funding spectrum, see our business loans guide and our revenue-based financing pillar.

Where Revenue-Based Funding Fits the Buyer

The acquisition loan buys the business. It rarely leaves you liquid. The moment you take over, you inherit a payroll cycle, supplier terms, and a receivables pipeline you have not yet learned to manage — and the SBA loan proceeds are usually earmarked, not free cash.

A revenue-based funding marketplace is built for exactly this gap. Instead of underwriting your personal credit history and a business plan, it approves on the bank deposits and revenue of the business you just bought — the operating reality, not a projection. That means:

• Approval decisions in 24 to 48 hours, versus weeks for a bank line.
• Funding available on businesses with owner FICO 500+, so a thin or recovering credit file does not block you.
• Amounts starting around $10,000, sized to a percentage of monthly revenue rather than to collateral.
• Repayment that flexes with cash flow — you remit as a share of receipts, which cushions slow weeks during the transition.

The honest framing: this is more expensive than an SBA loan and should never be the vehicle you use to buy the business. It is a working-capital bridge for the stabilization period, or for a growth push (new inventory, a second location) once you have owned the business long enough to trust its numbers. No legitimate funder can promise approval — anyone who guarantees it is a warning sign.

Realistic Example: Financing a $600,000 Business Purchase

The figures below are illustrative and labeled for example only. They show how the layers typically assemble on a small acquisition — not a quote.

The lesson buyers miss: the first three rows get you to closing, but the fourth row is what keeps the doors open in months one through three. Plan the working-capital layer before you sign, not after the first payroll scare.

Buyer Decision Framework: Which Path, and When

Match the tool to the deal instead of forcing one product onto every situation.

SBA 7(a) works best when:

• The business has clean, provable cash flow (tax returns and P&Ls that support debt service).
• You have at least 10% to put down and can wait 60-90 days to close.
• Goodwill is a large part of the price — SBA finances it; most banks will not.

Conventional or seller financing works best when:

• The deal is asset-heavy (equipment, real estate) and can secure conventional debt, or
• The seller is motivated to carry paper and you want a faster, cheaper close.

Revenue-based funding works best when:

• The business is already generating steady deposits and you need working capital now, post-close.
• Your personal credit is thin or recovering (FICO 500+) but the business revenue is real.
• Speed matters — a supplier deadline, a payroll cycle, a seasonal inventory buy.

Avoid revenue-based funding when:

• You are trying to fund the purchase itself — the cost structure is wrong for a long-horizon buy.
• The business has thin or highly seasonal deposits that cannot comfortably support a revenue share.
• You have not yet operated the business long enough to trust its cash flow — do not stack financing onto numbers you do not understand.

How to Prepare Before You Apply for Any of It

Whichever layer you pursue, the same preparation shortens the timeline and improves your terms:

• Get three years of the target's financials and tax returns. Every lender underwrites the business's history; incomplete records are the top reason acquisition loans stall.
• Order or expect a business valuation. SBA requires an independent one on goodwill-heavy deals. Knowing the number early prevents a renegotiation at closing.
• Line up your equity injection and document its source. Lenders verify that your down payment is not itself borrowed (with limited exceptions like a standby seller note).
• Separate purchase capital from working capital in your plan. Decide which layer funds the first 90 days of operation before you sign the purchase agreement.
• Have three to six months of the business's bank statements ready. For revenue-based funding, deposits are the underwriting file — clean, consistent statements drive both approval and the amount offered.