The SBA doesn't lend money directly, it guarantees part of a loan made by a participating bank, which lowers the bank's risk and lets it finance up to 90% of a business acquisition. You contribute a 10% equity injection, and the business's own cash flow repays the loan over a term of up to 10 years with no balloon. That guarantee is what makes ordinary buyers financeable.
The mechanics, step by step
- You find a qualifying business with verifiable cash flow.
- A bank underwrites the deal, checking you (credit, experience) and the business (cash flow, DSCR).
- The SBA guarantees a share of the loan, reducing the bank's downside.
- You inject ~10%, and the bank funds the rest.
- The business's cash flow repays the loan monthly for up to 10 years.
Rates, terms, and limits
| Term | Typical |
|---|---|
| Down payment | 10% equity injection (min. 5% buyer cash) |
| Rate | Prime (~6.75%) + spread ≈ 9.5 to 11.75% |
| Amortization | Up to 10 years, no balloon |
| Max loan | Up to $5,000,000 |
| DSCR minimum | ~1.15 to 1.25× |
| Personal guarantee | Owners of 20%+ |
Walk through the whole process in the SBA 7(a) acquisition guide, and model your payment with the SBA loan calculator.
How long it takes
An SBA acquisition loan commonly takes about 60 to 90 days from application to funding, running alongside due diligence. Using an SBA-preferred lender, responding fast to document requests, and having clean financials all speed things up. See the full timeline and approval process.
Frequently asked questions
The SBA guarantees part of a bank loan, letting the bank finance up to 90% of the deal. You put down 10%, and the business's cash flow repays it over up to 10 years, no balloon.
Roughly Prime + spread, about 9.5 to 11.75%, often variable. Up to 10-year amortization, no balloon, loans to $5M, and a personal guarantee from owners of 20%+.
Commonly about 60 to 90 days from application to funding, in parallel with diligence. A preferred lender and clean financials speed it up.
