The good news: you have more options than just SBA loans. Term loans, lines of credit, seller financing, and even 0% interest card stacking can all play a role. Lendora Funding works with buyers nationwide to match them with the right mix of solutions.
This guide breaks down loan types, what lenders want to see, real cost estimates, and how to structure financing for larger deals.
Key Takeaways
- Finance acquisitions with SBA loans, conventional term loans, seller financing, or a mix of all three
- Plan for a 10% down payment on SBA 7(a) loans or 20–25% on conventional bank loans
- Expect lenders to weigh personal credit, the target business’s cash flow, and available collateral
- Structure larger deals ($2M+) by blending SBA 7(a), SBA 504, and seller financing
Why Buy an Existing Business?
Starting from zero means building a customer base, hiring untested staff, and hoping cash flow eventually shows up. Buying an established business skips that uncertainty. You get:
- Immediate revenue from day one instead of months of ramp-up
- Existing customer relationships the previous owner already built
- Trained staff who already know how the business runs
- Proven systems rather than untested processes
Buyer demand backs this up. According to the IBBA and M&A Source Market Pulse Q4 2025 survey, 54% of business brokers expected deal volume to increase in the following three months, and individual buyers made up 46% of Main Street acquisitions in 2025.
That demand comes at a cost, though. Established businesses carry a premium for goodwill: the customer base and reputation you're buying into.
There's risk too—hidden liabilities, inflated financials, or customer concentration issues that only surface during due diligence. Get a qualified accountant and attorney involved before you sign anything.
Types of Loans for Buying a Business
SBA 7(a) Loans
The SBA 7(a) program is the most common acquisition financing tool. It officially supports full or partial ownership changes, with loans up to $5 million. What makes it attractive:
- Down payments as low as 10% in many cases
- Terms stretching up to 10 years for goodwill and working capital
- Funds can cover the purchase price, working capital, and even some real estate
- Flexible use of proceeds compared to asset-specific loans
SBA 504 Loans
If your target business comes with real estate or heavy equipment, SBA 504 loans fill a different niche. The maximum is $5.5 million, but funds are restricted to fixed assets — not goodwill or working capital. The structure typically involves three parties:
- A private lender covers up to 50% of the project
- A Certified Development Company (CDC), backed by SBA, covers up to 40%
- The borrower contributes at least 10% equity
Conventional Term Loans and Bank Loans
Banks will finance acquisitions, with stricter credit standards and down payments typically in the 20–25% range, according to guidance cited by the U.S. Chamber of Commerce. Compared with SBA programs, conventional loans often mean:
- Faster underwriting for borrowers with strong financials
- Fewer program-specific documentation requirements
- Less flexibility on goodwill and softer deal costs
Lines of Credit and Equipment Financing
These rarely fund the entire purchase, but they're valuable post-close:
- Lines of credit bridge payroll gaps, seasonal dips, and unexpected expenses after you take over
- Equipment financing pulls machinery and vehicles out of the goodwill portion of the deal, using the assets as collateral
Seller Financing and Combination Structures
When a single bank or SBA loan cannot cover the full price, the seller may carry a note for part of the deal. You repay that portion with interest over time. Per the U.S. Chamber's cited guidance, sellers have financed anywhere from 5% to 60% of the asking price this way. Buyers often pair seller notes with an SBA or conventional loan to close the valuation gap.
Alternative Options
If traditional debt still leaves a gap, two less common paths sometimes fill it:
- 0% interest credit card stacking — short-term, unsecured capital from multiple business cards during 0% APR intro periods (typically 6–18 months); better for smaller cash needs than a full acquisition
- ROBS (Rollovers as Business Startups) — uses retirement funds without early-withdrawal penalties; not a loan, so there is no repayment, but your savings are at risk if the business struggles Lendora Funding works with buyers on SBA loans, term loans, lines of credit, equipment financing, and structures like card stacking when they fit the deal.
What Lenders Look for When You Apply
Every lender wants the same basic reassurance: you can repay this loan. How they measure that varies.
Personal Credit Score
Score floors differ by product, but common benchmarks give you a clear target. NerdWallet notes SBA borrowers typically need around 690. Forbes Advisor puts 670 as the general threshold for competitive rates, while some alternative lenders go as low as 500.
Down Payment and Equity Injection
Most acquisition lenders want you financially committed to the deal. Typical equity expectations:
- SBA 7(a): about 10% down in many cases
- SBA 504: at least 10% borrower equity
- Conventional loans: 20–25% down is common
Business Cash Flow and DSCR
Lenders check whether the target business generates enough cash to cover the new loan payment. Chase notes many banks look for a debt service coverage ratio (DSCR) of at least 1.25 — meaning the business produces 25% more cash than the loan payment requires.
Collateral and Personal Guarantees
Expect to pledge business assets—equipment, receivables, or real estate tied to the deal—and sign a personal guarantee. SBA loans almost always require guarantees from owners with roughly 20% or greater ownership, so your personal credit and net worth stay part of the underwriting file.
Business Plan and Buyer Background
Lenders also underwrite you as the operator. A strong file shows industry knowledge, relevant management experience (or a clear plan to fill gaps), and a transition roadmap covering staffing, customer retention, and the first 90 days of ownership.
Estimating the Cost: Down Payments, Rates, and Monthly Payments
Let's put numbers to this. Say you're buying a business for $500,000.
| Loan Type | Down Payment | Loan Amount | Est. Rate Range |
|---|---|---|---|
| SBA 7(a) | $50,000 (10%) | $450,000 | Prime-linked, negotiated |
| Conventional | $125,000 (25%) | $375,000 | 7.10%-7.76% (term loan median) |
The Federal Reserve's prime rate sat at 6.75% as of August 2026, and that's the base many acquisition loans are pegged to. The Kansas City Fed's small business lending survey put median new term-loan rates between 7.10% and 7.76% in Q3 2025.
Rate is only half the picture. On a $450,000 SBA 7(a) balance near 9% over 10 years, monthly principal and interest often land around $5,700. A $375,000 conventional term loan at about 7.5% over 10 years is closer to $4,450 a month (shorter terms push that higher).
A lower rate still fails if the business cannot cover that payment plus normal operating costs. Use DSCR and the target company's real cash flow, not loan terms alone, when you size the deal.
Financing Larger Acquisitions ($2-3 Million Deals)
Bigger deals need bigger, more layered structures.
- SBA 7(a) tops out at $5 million: plenty of room for most $2-3 million acquisitions on its own
- Blend 7(a) with 504 when the deal includes owner-occupied real estate or major equipment, since 504 funds are restricted to fixed assets
- Add seller financing or investor equity to close remaining gaps without over-leveraging
At this size, lenders typically require:
- Multi-year financial statements and tax returns from the target business
- A detailed post-close cash flow forecast
- Collateral sufficient to cover the loan balance
- A transition plan showing how you'll manage the business after close
Don't walk into a $2-3 million ask with a one-page business plan—bring the full package lenders expect at this size.
How Lendora Funding Helps You Buy a Business
Every acquisition looks different, and so does the right financing mix. Lendora Funding helps buyers nationwide structure deals with term loans, lines of credit, equipment financing, SBA loans, real estate funding, and 0% interest card stacking—matched to the purchase in front of you.
Support built around the buy:
- Personalized consultations that dig into your financial situation before recommending a path forward
- Credit repair support to strengthen your profile before you apply and improve your odds of approval
- A soft credit pull during pre-qualification, so exploring your options doesn't hurt your credit
If you're evaluating a business purchase, schedule a consultation to map the financing options for your deal.
Frequently Asked Questions
Can I take a loan to buy a business?
Yes. SBA loans, conventional bank loans, and seller financing are all common paths, and most buyers combine two or more sources to close the full purchase price.
How hard is it to get an acquisition loan?
Difficulty depends on your personal credit, available down payment, and the target business's cash flow. Buyers with thinner credit or smaller down payments often add seller financing or alternative funding to close the gap.
What is the best way to finance a small business purchase?
SBA loans are often the most flexible and affordable route because of low down payments and long terms. The right choice ultimately depends on deal size and your financial profile.
What are the two types of financing for a business?
Debt financing (loans you repay with interest) and equity financing (selling ownership stakes to investors). Most acquisitions use debt to preserve ownership control.
How much would a loan for buying a business cost per month?
A $450,000 SBA loan at roughly 7% over 10 years runs approximately $5,225 per month. Your actual payment depends on the rate, term, and lender.
How do I get a $3 million loan to buy a business?
Combine SBA 7(a) and 504 loans, or blend a bank loan with seller financing and investor equity. Strong financials, solid collateral, and a detailed business plan are essential at this size. An experienced funding partner can help structure the pieces correctly.
