Introduction
The Small Business Administration (SBA) acquisition loan is one of the most powerful tools available to entrepreneurs and investors looking to buy a business. It combines low down payments, long repayment terms, and flexible structures that make ownership accessible. But SBA financing is complex — approvals hinge on presenting the deal correctly and choosing the right lender.
This guide breaks down everything you need to know in 2025 about SBA acquisition loans, from eligibility to structuring to closing.
What Is an SBA Acquisition Loan?
An SBA acquisition loan is a government-backed loan that helps buyers acquire existing businesses. The SBA guarantees a portion of the loan, making lenders more willing to approve deals.
Two programs dominate acquisition financing:
- SBA 7(a): The most common for goodwill-heavy acquisitions up to $5M.
- SBA 504: Typically for deals involving significant fixed assets like real estate or equipment.
Why Buyers Choose SBA Financing
- Lower Down Payments: As little as 10%.
- Longer Terms: Up to 10 years for goodwill, 25 years if real estate is included.
- Flexible Uses: Can cover goodwill, working capital, equipment, and even seller notes.
- Favorable Rates: Pegged to prime plus a spread, often lower than private capital.
Eligibility Requirements
- Business Type: Must be a U.S.-based, for-profit business.
- Buyer Credit: Typically 650+ credit score.
- Management Experience: Industry or transferable management background.
- Cash Flow: Business must demonstrate sufficient DSCR (usually 1.25x or greater).
The SBA Acquisition Process
- Prequalification – Review buyer financials and deal structure.
- Lender Match – Identify SBA-preferred banks suited for the industry.
- Application & Underwriting – Submit tax returns, P&Ls, purchase agreement, and buyer documentation.
- Approval & Closing – Finalize terms, fund, and close the acquisition.
Common Challenges
- Seller not willing to finance part of the deal.
- High goodwill relative to assets.
- Buyers with limited industry experience.
- Businesses with customer concentration risk.
Yaw Capital overcomes these by structuring deals in lender-friendly ways and leveraging relationships with SBA-preferred lenders.
SBA in 2025 – What’s Changed?
- Interest Rates: Still tied to prime, but spreads vary widely.
- Documentation Standards: Stricter cash flow analysis due to post-pandemic volatility.
- Timing: Average 60–90 days to close; experienced intermediaries can move faster.
Conclusion
For acquisitions under $5M, SBA remains the gold standard. With the right advisor, buyers can unlock capital with low equity requirements and favorable terms.
