Most small-business acquisitions are financed with three pieces: an SBA 7(a) loan for the bulk of the price, a seller note for part of the balance, and the buyer's own 10% down payment. The business's cash flow then repays the debt. This "stack" is why an ordinary buyer can control a $1M company while writing a check for a small fraction of that amount.
The typical financing stack
A common structure on a $1,000,000 acquisition looks like this:
| Source | Amount | Role |
|---|---|---|
| SBA 7(a) loan | $800,000 | Bank debt, ~10-yr term, no balloon |
| Seller note | $100,000 | Seller financed; may be on standby |
| Buyer equity injection | $100,000 | 10% down, at least half in cash |
| Total | $1,000,000 | Repaid by the business's cash flow |
The main financing options
- SBA 7(a) loan, the default: up to 90% financing, long term, ~9.5 to 11.75% rates. See how SBA loans work for buying a business.
- Seller financing, the seller carries part of the price as a note, aligning their incentives with yours.
- Conventional bank loan, possible for strong buyers and asset-rich deals, but usually more down.
- Retirement rollover (ROBS), fund the down payment from a 401(k)/IRA without early-withdrawal penalties.
- Investor equity, partners contribute capital in exchange for a share of the business.
Explore each path in our deal-structures guides and the full SBA loan hub.
Make sure the cash flow carries it
Whatever the stack, the deal only works if the business's cash flow covers the debt with a healthy DSCR. Model the monthly payment with the SBA loan calculator before you make an offer.
Frequently asked questions
Usually a combination of an SBA 7(a) loan for most of the price, a seller note for part of the balance, and at least 10% down from the buyer, repaid by the business's cash flow.
True zero-down is rare, SBA needs a 10% injection. But up to half can come from a standby seller note, and rollovers or investors can cut the cash you bring.
Generally around 680 or higher for an SBA loan, though some lenders accept lower with strong cash flow and experience.
