How to Use an SBA Loan to Buy a Business

You can buy a business with an SBA 7(a) loan if you put at least 10% down, the business's past cash flow covers the new loan payments at least 1.25 times, and you have experience to run it. The 7(a) can cover the purchase price, real estate, equipment, and working capital in one loan, up to $5 million.

The rules changed on October 1, 2026. If you started shopping before then, read the changes below.

What the lender looks at

1. The business's history. Usually three years of tax returns and financial statements. The bank lends against what the business has earned, not what you plan to do with it.
2. Cash flow coverage. The business must cover all loan payments, including the new one, at least 1.25 times based on historical results.
3. Your experience. Lenders want to see you've managed a similar business, or that you have a solid plan and a seller who will help with the transition.
4. A fair price. An independent business valuation is required. The total loan can't be more than the appraised value of the business.
5. Your down payment and credit. At least 10% of total project cost, mostly your own money.

What changed on October 1, 2026

Rule	Before	Now
Minimum DSCR	1.15, and projections could help	1.25 on historical cash flow
Quality of earnings report	Not required	Required at a $3 million purchase price or higher
Loans of $350,000 or less	Simpler small-loan underwriting	Full underwriting for every acquisition

These apply to loans that get an SBA loan number on or after October 1, 2026.

The down payment and seller notes

You need at least 10% of the total project cost: purchase price plus closing costs, working capital, and financed fees. A seller note can cover up to half of that 10%, but only if it's on full standby for the life of the SBA loan, meaning the seller gets no payments until the SBA loan is paid off. A seller note that pays current interest doesn't count toward your down payment.

If the seller stays involved

• Seller keeps any ownership, even 1%: the seller must personally guarantee the loan for at least two years.
• Seller sells 100%: the seller can stay on as a paid consultant for a limited transition period.

Most deals end with the seller selling everything and helping through a short handoff.

How long it takes

Plan on 60 to 90 days from signed letter of intent to closing for a well-prepared deal. The valuation, quality of earnings report on larger deals, and legal work drive the timeline. See how long an SBA loan takes.

Run your numbers first

Use the How Much Can I Borrow? calculator with the seller's cash flow and a 1.25 DSCR. If the loan it supports is less than you need, you'll need a lower price, a bigger down payment, or a seller note to close the gap. See SBA down payments for how the down payment rules work.

Common questions

Can I use an SBA loan to buy a business?

Yes. The SBA 7(a) loan is the most common way to finance a small business purchase. It can pay for the business, its real estate, equipment, and working capital in one loan, up to $5 million.

How much down payment do I need to buy a business with an SBA loan?

At least 10% of the total project cost. A seller note can cover up to half of that if it is on full standby for the life of the SBA loan. The rest must be your own money.

What DSCR is required for an SBA business acquisition loan?

For SBA loans issued a loan number on or after October 1, 2026, business acquisitions need a debt service coverage ratio of at least 1.25, based on the business's historical cash flow. Projections can no longer make up a shortfall.

Can the seller stay on after an SBA business sale?

Yes, but with limits. A seller who keeps any ownership must personally guarantee the loan for at least two years. A seller who sells everything can stay on as a paid consultant for a limited transition period.