The usual building blocks of an acquisition
Most small business purchases are funded with a mix of senior debt, often SBA-backed, a seller note and the buyer's own cash.
- SBA 7(a) loans: a common route for buying a small business. The SBA states the maximum 7(a) amount is $5 million (checked October 2026). Equity injection rules, fees and terms change, so confirm current requirements with an SBA lender.
- Conventional bank loans: possible for strong buyers with collateral and industry experience.
- Seller financing: the seller lends part of the price, repaid over time. It shows the seller believes the business will keep performing.
- Buyer equity: your cash in the deal. Lenders want you to have meaningful skin in the game.
- Earn-outs: part of the price paid later only if the business hits targets.
For a broader overview, read funding for buying a business.
Criteria for choosing acquisition financing
Compare the term, the total cost, how much equity is required, the collateral and guarantees, and how long closing will take.
| Source | Strength | Tradeoff |
|---|---|---|
| SBA-backed loan | Long terms, lower payments | Slow process, heavy documentation |
| Bank loan | Competitive cost for strong buyers | Strict collateral and experience rules |
| Seller note | Flexible terms, aligned seller | Seller must agree; may be subordinate to the bank |
| Buyer equity or investors | No payment pressure | Dilutes ownership if investors join |
| Short-term revenue-based funding | Fast | Rarely suitable as the main purchase funding |
Short, fast money is a poor fit for buying a company. A purchase earns back over years, so the debt should be repaid over years.
An illustrative debt coverage check
Compare the target's real cash flow, after paying you a fair salary, with the total annual debt payments. Lenders want comfortable coverage, often measured as a ratio.
This is an illustrative example. A buyer is purchasing an HVAC service company for $1,000,000.
- Seller's discretionary earnings: $300,000 a year.
- Less a market salary for the buyer as manager: $90,000. Cash flow available for debt: $210,000.
- Structure: $100,000 buyer equity, $100,000 seller note, $800,000 senior loan over ten years.
- Estimated annual payments: about $135,000 on the senior loan and $24,000 on the seller note, total $159,000.
Coverage is about 1.32 times. That is workable but leaves limited room for a bad year or a big equipment replacement. The buyer might negotiate a longer seller note or a lower price. Read more about the debt service coverage ratio.
Due diligence that protects the loan and you
Verify revenue against bank deposits, check customer concentration, confirm the lease and equipment, and plan the transition with the seller.
- Match tax returns and profit and loss statements to actual bank deposits.
- Find out what share of revenue comes from the top three customers.
- Confirm the lease can be assigned to you and on what terms.
- Inspect key equipment and check for existing liens with a UCC search.
- Look for unpaid taxes, lawsuits or licensing issues.
- Agree on a seller training and transition period in writing.
A lawyer and an accountant who handle business purchases are worth their fees here. See how to value a small business.
Red flags in acquisition deals
Walk away from numbers you cannot verify, sellers unwilling to carry any note, and financing that leaves no working capital after closing.
- Cash revenue the seller says exists but never deposited.
- A seller refusing any seller note or transition period.
- A structure that uses every dollar you have, leaving nothing for the first payroll.
- Short-term, daily-pay products used to fund the purchase price.
- Heavy dependence on the seller's personal relationships with customers.
Where ROI Funder fits, and where it does not
ROI Funder does not place acquisition loans. Once you own and operate the business for six months, we can help with working capital, equipment and growth funding.
For the purchase itself, talk to an SBA lender or a bank that handles acquisitions. After closing, many new owners find they need cash for things the purchase loan did not cover: replacing tired equipment, rebuilding inventory, or bridging a slow first season. That is where we fit.
Once the business has 6+ months of history under any ownership, $20,000+ monthly revenue and you have a 500+ FICO, you can apply online in a few minutes with a soft pull. We match your file to funders in our network, from $5,000 to $5,000,000, and show the true cost, payback period and monthly-equivalent payment before you sign. Funding for a partner buyout is a separate case; see funding for buying out a partner.
Frequently asked questions
How much down payment do I need to buy a business?
It varies by lender and program. SBA and bank lenders typically require meaningful buyer equity, and seller notes can sometimes count toward it. Confirm current rules with your lender.
Can I buy a business with no money down?
It is rare. Most lenders want the buyer to have cash at risk, though heavy seller financing can reduce what you need.
Does ROI Funder fund business acquisitions?
No. ROI Funder does not place acquisition loans, but it can fund working capital, equipment and growth once you own an operating business.
How long does an acquisition loan take?
SBA acquisition loans commonly take weeks to a few months, depending on the deal and how quickly documents come together.
Should I keep cash in reserve after buying a business?
Yes. Plan for at least a few months of operating costs after closing. New owners often find deferred maintenance, slow customers or staff turnover in the first year, and a reserve keeps those surprises from becoming a crisis.