The short answer: business acquisition financing is the combination of debt and equity that pays for the purchase. For Main Street deals the standard stack is an SBA 7(a) loan covering up to 90% of the deal with as little as 10% down and loans up to $5,000,000, often combined with a seller note and your own equity injection. The bank does not lend against your salary or your optimism; it lends against the business's own cash flow, which is why every structure below lives or dies on the same test.
The stack, layer by layer
Think of the purchase price as a stack of layers, cheapest and most senior at the bottom, most expensive and most flexible at the top. Most buyers combine two or three of these rather than choosing one.
| Layer | What it is | Where to go deeper |
|---|---|---|
| SBA 7(a) loan | The workhorse: up to 90% of a qualifying acquisition, terms up to 10 years for goodwill-heavy deals | SBA 7(a) for acquisitions |
| Seller financing | The seller carries part of the price as a note, which aligns their honesty with your outcome | Seller financing guide |
| Seller note on full standby | A seller note with no payments for the life of the SBA loan, which can shrink the cash you bring | Full-standby seller notes |
| Equity injection | Your down payment, and the rules on where it can come from | Down payment & equity injection |
| ROBS / 401(k) rollover | Funding the injection from retirement savings without an early-withdrawal penalty | ROBS 401(k) funding |
| Home equity (HELOC) | Borrowing the injection against your house, with the risks stated plainly | HELOC & home equity |
| Investor capital | Selling equity to fill the gap, and what it costs you in ownership | Raising investor money |
The seller note deserves special attention because it can do double duty. Put on full standby for the life of the SBA loan and capped at half the required injection, it can count toward your down payment, which is how buyers legitimately shrink the cash they bring to closing; the mechanics and limits are in can seller financing count as your down payment.
The math that decides it: debt service coverage
Whatever you stack, the lender runs one test: does the business's cash flow cover the combined debt payments with room to spare? That ratio, the DSCR, is explained in plain English in our DSCR guide, and you can compute it for a live deal in the DSCR calculator. Run it before you fall in love with a listing: the max purchase price tool inverts the same math to tell you what you can afford on a given cash flow.
Choosing a structure for your situation
Which layers you use depends less on preference than on what you are walking in with. A buyer with savings and a W-2 usually runs the classic 7(a) plus seller note; a buyer with operating experience and thin savings leans harder on standby notes, ROBS, or investors. The honest version of the zero-cash path, including where it breaks, is in buying a business with no money down, and the self-funded route is compared with raising a fund in self-funded search vs search funds. If you are still deciding whether a bank loan is the right instrument at all, SBA vs conventional loans lays out the trade.
What it costs beyond the loan
Budget past the down payment. Closing costs on an SBA acquisition run about 3% to 5% of the loan, much of which can be rolled into the loan rather than paid in cash, and the full cash-at-closing picture, working capital included, is in how much money you need to buy a business. If you are earlier in the journey and still building the foundational knowledge, start with the best ways to learn business acquisition before you structure anything.
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Frequently asked questions
It is the combination of debt and equity used to pay for a business purchase. In most Main Street deals that is an SBA 7(a) loan at the base, often a seller note in the middle, and the buyer's equity injection on top.
With an SBA 7(a) loan, up to 90% of a qualifying acquisition can be financed, with as little as 10% down and loans up to $5,000,000. The exact split depends on the deal and the lender's cash-flow analysis.
Yes, and it is common. The seller carries a note for part of the price; if that note is on full standby for the life of the SBA loan, part of it can even count toward the required down payment.
The debt service coverage ratio, DSCR: whether the business's cash flow covers all debt payments with margin. If a deal fails that test, no amount of structuring fixes it, and the price has to come down.
