Business Acquisition Deal Desk™
See every deal the way a lender does. Test the cash flow, work through a getting-started checklist, and learn what to look for before you make an offer.
Business Acquisition Deal Desk™ · Paul Long · 253-300-5414 · paul@paultlong.com
What price can this business support?
Enter the business cash flow to see this.
Sources of funds
| SBA loan | $0 |
| Your cash down payment | $0 |
| Seller note on standby | $0 |
| Additional seller note | $0 |
| Total project cost | $0 |
If the rate moves
| Rate | Monthly payment |
|---|
Loan balance over time
Estimates only. This is not a loan offer, rate quote or commitment to lend. Actual rates, terms, fees and down payments depend on your lender, your credit and the business. SBA loans are often variable-rate, so your payment can change when prime changes.
Getting-started checklist
Tick items as you finish them. Your progress is saved in this browser.
What to look for when buying a business
Green flags show a business that is easier to finance and run. Red flags are not always deal-breakers, but each one deserves an answer before you sign.
Questions to ask the seller
Write down the answers. Ask your accountant and your lender to review them.
Businesses that are generally not SBA eligible
Rules change and there are exceptions. Ask your lender to confirm before you spend money on a deal.
- Businesses mainly engaged in lending or investing, such as banks, finance companies and pawn shops
- Passive businesses that only collect rent or earn money from assets for absentee owners, with some exceptions
- Businesses that earn more than a third of their revenue from gambling
- Businesses that are illegal under federal, state or local law, including cannabis businesses
- Pyramid or multi-level sales plans where the focus is recruiting
- Charitable, religious and other nonprofit organizations
- Government-owned entities
- Businesses that restrict who they serve for reasons other than capacity
- Businesses not fully owned by U.S. citizens, nationals or lawful permanent residents
How the process works
A business acquisition typically takes 45 to 65 days from your first conversation with a lender. Getting your lender what they need quickly makes it faster.
Pre-qualification
A pre-qualification letter tells the broker and seller that a lender has reviewed your financials and you are a good candidate.
Underwriting and due diligence
The lender reviews all financials and prepares the loan for approval. Questions from the lender and third parties are normal.
Third-party reports
The lender orders required reports, such as a business valuation (required for every acquisition) and, when the business price is $3 million or more, an independent quality of earnings report. An appraisal or environmental report may be needed if real estate is involved. Timing depends on the report and the third party.
Closing
The lender seeks final approval and prepares loan documents. Review the final terms against what you were offered at pre-qualification.
Rules to know before you make an offer
From Paul’s SBA FAQ.
- Down paymentThe SBA has a 10% minimum equity injection for business acquisitions, start-ups and some partner buyouts.
- Seller financingA seller note can count toward your required 10% equity injection, up to half of it (5% of total project cost). To count, the note must be subordinated to the lender and on full standby, with no principal or interest payments for the full term of the SBA loan.
- Personal guaranteeAnyone who owns 20% or more of the business provides a personal guarantee. If any owner is a trust, the trust must guarantee the loan and the trustor must personally guarantee it, at any ownership percentage.
- CollateralIf you own real estate with 25% or more equity, you will need to pledge that equity toward the loan until it is fully secured, or all available collateral has been pledged.
- Cash flowThe business’s own cash flow must be the primary source of repayment. For a business acquisition, SBA SOP 50 10 8.1 requires a debt service coverage ratio (DSCR) of at least 1.25x, based on historical cash flow. Projections can be reviewed but cannot be relied on to meet the test. Collateral is a backup, not a substitute.
- Earn-outsThey are not allowed in a change of ownership. The purchase price must be fixed. Some buyers use a forgivable seller note to protect against downside risk.
- Buying part of a businessAllowed, but any remaining owners with 20% or more ownership must personally guarantee the loan.
- Businesses the SBA does not lend toPassive businesses, businesses that promote religion, gambling businesses, strip clubs, and anything illegal at the federal level, among others.
Ready to see what your real numbers could look like? Tell Paul about the business you are looking at.
Common questions about buying a business with an SBA loan
How much down payment do I need?
For a business acquisition, the SBA requires at least 10% equity injection. A seller note on full standby can cover up to half of that (5% of the project). Some lenders ask for more, depending on the deal.
How long does it take?
A business acquisition typically takes 45 to 65 days from your first conversation with a lender. Getting your lender what they need quickly makes it faster.
What is debt service coverage (DSCR)?
It compares the cash flow the business produces with its yearly loan payments. For a business acquisition, SOP 50 10 8.1 requires at least 1.25x, measured on historical cash flow.
Can the seller carry a note?
Yes. A seller note on full standby, with no payments for the full term of the SBA loan, can count toward your equity injection, up to half of the required 10%. A seller note that makes payments does not count toward it and is treated as business debt. If it is interest-only, lenders figure its payment as if it were repaid over 10 years. Its payments reduce the cash flow available to repay the SBA loan.
How long can the loan term be?
SBA 7(a) loans for a business acquisition generally have a term of up to 10 years. Loans that include real estate can run longer.
Is the Cash Flow Qualifier a loan offer?
No. It gives estimates to help you plan. Actual rates, terms and eligibility are set by the lender and the SBA.
Plain-English glossary
- DSCR (debt service coverage ratio)
- Yearly cash flow available to pay debt, divided by yearly loan payments.
- SDE (seller’s discretionary earnings)
- The business profit plus the owner’s pay and other personal or one-time costs. It is the cash flow a new owner could expect.
- Add-backs
- Expenses a seller adds back to profit because a new owner would not have them, such as personal costs. Lenders and accountants test these.
- Equity injection
- The money you put into the deal yourself, including some seller financing. The SBA minimum for a business acquisition is 10%.
- Standby note
- A seller note with no payments for a set period. For SBA equity credit, it must stay on full standby for the full term of the SBA loan.
- Change of ownership
- When a buyer takes over an existing business, rather than starting a new one.
- Personal guarantee
- A promise to repay the loan personally if the business cannot. Owners of 20% or more provide one. If an owner is a trust, the trust and the trustor guarantee at any percentage.
- Letter of intent (LOI)
- A written offer that sets the main terms before contracts are signed.
Reflects SBA SOP 50 10 8.1, effective October 1, 2026, for loans that receive an SBA loan number on or after that date. Estimates for education only. This is not a loan offer, commitment or credit decision. Actual rates, terms and eligibility are set by the lender and the SBA and depend on your full application. SBA rules change, so confirm current requirements with your lender.