Business Acquisition Loans, How to Finance Buying a Business
The full financing stack for buying an existing business. SBA 7(a) anchors most deals at 8.5% to 9% with as little as 5% cash down using a standby seller note.
In This Article
- The standard structure is 5% cash down. SBA requires a 10% equity injection, and up to half can be a seller note on full standby, verified mid 2026.
- The worked math on a $500,000 deal. $25,000 buyer cash, $25,000 standby seller note, $450,000 SBA 7(a) at 8.75% over 10 years is about $5,640 a month, needing roughly $84,600 a year in cash flow to cover at 1.25x.
- Lendio is our tested route to SBA lenders, one form, multiple offers, acquisition floor of $250,000.
- National Funding is the working capital layer, as fast as 24 hours, for the first months after close when payroll lands before receivables.
A business that already pays its own bills is the easiest thing a bank will ever lend you money for. Few buyers know this. It is the open secret behind the 2026 wave of people buying laundromats, HVAC companies, and trucking firms instead of founding startups. The seller hands over years of real cash flow records. The lender underwrites those instead of your projections. Your job is to structure the money correctly, and the structure is surprisingly standard. Here is the whole stack, with real numbers, and where each piece of it comes from.
Lendio
APR from 10%
Get StartedSide-by-Side Comparison
| Feature | |  |  |
|---|---|---|---|
| Role in the deal | The acquisition loan, SBA route | Working capital layer after close | Below the bars fallback |
| Amounts | $250,000+ acquisitions, up to $5M via SBA | $5,000 to $500,000 | $5,000 to $600,000 |
| Pricing | SBA 8.5% to 9% as of mid 2026, by lender | Factor rates from 1.10 | Factor rates from 1.11 |
| Speed | 1 to 3 months for SBA deals | As fast as 24 hours | Same day to 48 hours |
| Buyer credit | 680+ for SBA lenders | 600+ | 500+ |
Full Reviews
Lendio gives you one application to shop 75+ lenders, but your data goes wide and final rates can climb past 50% APR.
Time in business: 6+ months
Min. revenue: $50K/year
Pros
- One 15-minute application reaches 75+ lenders, saving hours of individual applications across different platforms
- Accepts borrowers with credit scores as low as 560, giving subprime borrowers more options than most direct lenders offer
- Wide product range covering term loans, lines of credit, SBA 7(a), MCAs, equipment financing, and invoice factoring through a single portal
- Dedicated funding specialists walk first-time borrowers through product selection at no charge to the borrower
Cons
- Your personal and business data (including SSN and tax returns) is shared with multiple third-party lenders who may retain it permanently and contact you aggressively via phone, email, and text
- APR range stretches to 60%, and you cannot see actual rates until after submitting your full application, making upfront comparison impossible
- Merchant cash advances use factor rates (1.1 to 1.5) that obscure the true annualized cost, which can exceed 50% APR
- Customer support is limited to weekday business hours (Mon-Fri 7:30am-5pm MT), and multiple BBB and Reddit complaints describe unresponsive service after the initial application
- Once matched with a lender, Lendio is no longer involved in servicing your loan, leaving you without an advocate if problems arise
Fast funding for fair-credit borrowers, but factor rates make the true cost hard to compare with traditional lenders.
Time in business: 6+ months
Min. revenue: $250,000/year
Pros
- Funds deposited as fast as 24 hours after approval, among the fastest in the alternative lending space
- Accepts personal credit scores as low as 600, opening the door for borrowers shut out by banks
- No prepayment penalty, with a 7% early payoff discount if you repay within the first 100 days
- Dedicated funding specialist assigned to each borrower, frequently praised by name in Trustpilot reviews
Cons
- Factor rates from 1.10 to 1.35 translate to true APRs that can exceed 50% on shorter terms, far above SBA or bank loan pricing
- No rates or fees are disclosed until you apply and speak with a specialist, blocking easy comparison shopping
- Daily or weekly ACH repayments can strain cash flow for businesses with uneven revenue cycles
- Aggressive unsolicited direct-mail campaigns (the Ignite card) generated the bulk of BBB complaints, and opting out is not straightforward
Fast funding for credit-challenged businesses, but factor rates can quietly push your effective APR above 30%.
Time in business: 6+ months
Min. revenue: $15,000/month
Pros
- Same-day funding possible with approval in as little as 4 hours, one of the fastest timelines among alternative lenders
- Accepts FICO scores as low as 500 and businesses with just 6 months of operating history
- Offers a prepayment discount of roughly 6% if you repay before the midpoint of your term
- Trustpilot score of 4.8 from 2,500+ reviews and A+ BBB rating since 2010, strong for the alternative lending category
Cons
- Factor rate pricing makes true cost comparison difficult; a 1.21 factor rate on a 12-month loan equates to roughly 30%+ effective APR
- The 2.5% origination fee is deducted from loan proceeds, reducing actual cash received while you repay interest on the full amount
- Daily or weekly automatic repayments can seriously strain cash flow for businesses with thin or variable margins
- Minimum revenue requirement of $15,000/month ($180,000/year) excludes many early-stage businesses, and Bankrate reports the real threshold may be $25,000/month
How to Choose
Buying a $250,000 to $5M business with two years of clean books
One application reaches multiple SBA lenders, and comparing offers matters most exactly here, rates float and spreads differ by bank.
Deal closed, first payroll lands before the receivables do
The acquired business has the revenue history NF underwrites, and 24 hour working capital is the layer that keeps the first quarter calm.
Deal under $250,000 or credit under 680
Lean harder on seller financing for the purchase itself and use Credibly's forgiving entry for the working capital around it.
The 30 Second Answer
Most small business acquisitions in 2026 are financed with a stack, not a single loan. The anchor is an SBA 7(a) loan, up to $5 million, with a minimum 10% equity injection, and up to half of that 10% can be a seller note on full standby. Rates ran 8.5% to 9% as of mid 2026. On top of the anchor, a seller note covers part of the price. A working capital line covers the first months after close.
Among our tested roster, Lendio is the pick for the loan itself, one application reaches SBA lenders and its acquisition floor starts at $250,000. National Funding is the pick for the fast working capital layer around the deal. Credibly picks up buyers below those bars. The wider toolkit lives in our funding options guide.
Why Buying Beats Starting, in One Paragraph
A startup asks a lender to believe your spreadsheet. An acquisition shows the lender eleven years of bank statements. That is the entire difference. Lenders price belief expensively and evidence cheaply. It is why acquisition debt at 8.5% exists while startup borrowing gets quoted 35% or declined. If the business you want has two or more years of steady cash flow, the financing system is built in your favor.
The Financing Stack, With Real Numbers
Take a $500,000 purchase. A standard structure looks like this. You put in $25,000 cash, which is 5%. The seller carries a $25,000 note on full standby, meaning no payments while the SBA loan runs, which covers the other 5% of the required injection. An SBA 7(a) loan funds the remaining $450,000.
At 8.75% over 10 years, the SBA payment is about $5,640 a month. Call it $67,700 a year. Lenders want the business to earn at least 1.25 times its debt payments, so this deal needs around $84,600 in annual cash flow after the owner's salary. If the business you are looking at clears that bar, this deal finances. If it does not, the price is too high, not the lender too strict.
Seller notes deserve respect. Buyers rarely give it. A seller who refuses to carry any paper is telling you what they think of their own books. Most sellers of healthy small businesses will carry 10% to 30% when asked, and the ask costs you nothing.
What Lenders Actually Check
Four things decide an acquisition loan. Your credit, most SBA lenders want a 680 or better from the buyer. The target's cash flow, two years of returns showing debt coverage of 1.25 or higher. Your experience, two years in the industry or in management, they are lending you a company to run. And the injection, 10% that is truly yours, borrowed down payments do not count, though the standby seller note structure above is fully allowed.
The Process in Five Moves
One, get the target's numbers. Three years of tax returns and a current profit and loss, no lender talks seriously without them. Two, agree a price and sign a letter of intent that names the seller note. Three, apply, one form through a marketplace reaches multiple SBA lenders at once and lets you compare terms. Four, survive underwriting, the lender orders a valuation, verifies the books, and stress tests the coverage ratio, expect one to three months end to end. Five, close and immediately set up the working capital layer, the first ninety days of ownership eat cash, payroll lands before receivables do. If cash flow timing is the worry, working capital loans and invoice factoring are the two standard answers.
When You Should Not Borrow for a Deal
Some deals deserve a no. Walk away when the coverage math only works with growth you have to create. Buy the business the books show, not the one you imagine running. Walk when the seller wants all cash at close and will carry nothing. And walk when the equipment list is doing the valuation's heavy lifting, equipment financed separately usually prices better than equipment bundled into the purchase.
Frequently Asked Questions
The SBA minimum is 10%. Up to half of it can come from a seller note on full standby, so many buyers bring 5% in cash. On a $500,000 deal that is $25,000 out of pocket.
Almost never through the front door. The 10% injection is a hard SBA rule and borrowed funds do not count. The realistic floor is 5% cash with a standby seller note covering the rest. Anyone promising zero down acquisition loans is usually selling something else.
SBA 7(a) rates ran 8.5% to 9% as of mid 2026. They float with prime. Non SBA acquisition debt from online lenders prices higher, often well into the teens. The SBA route is slower and cheaper, the online route is faster and dearer, that is the whole trade.
One to three months for SBA deals. The valuation and the underwriting of the target's books set the pace. Faster online working capital can land in days, which is why it is the layer, not the anchor.
Below roughly 680 the SBA route gets hard. Below 600 it is closed in practice. The honest path is smaller, buy a smaller business or a stake, use more seller financing, or build credit first. Revenue based lenders look at the business you already run, not the one you want to buy.
Marketplace acquisition floors commonly start around $250,000. Under that, SBA microloans reach $50,000, community lenders fill the middle, and seller financing carries more of the load. Small deals lean harder on the seller, which is fine, sellers of small businesses expect it.
About the Author
Senior Finance & Banking Editor
Richard is the veteran anchor of the site's financial content. Raised in the Midwest and starting his career in Chicago's commercial banking sector, he spent over a decade underwriting small business loans before moving into financial journalism. He doesn't get swept up in startup hype; he cares about unit economics, APYs, and fee structures.
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This page is for educational and informational purposes only and is not professional financial advice. Rates, equity injection rules, and underwriting standards change and vary by lender and applicant. Confirm all terms directly with the lender before signing any agreement. StartupOwl earns a referral fee on some providers, which does not affect our rankings.
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