How to finance your acquisition with an SBA loan

A brief guide to SBA loans and how to apply for one to finance your startup acquisition

SBA (small business administration) loans are government-backed loans for small businesses. They're designed to foster entrepreneurship and boost the economy. 

You can use them for various business purposes, including acquisitions, and below is a guide to using an SBA loan to finance the acquisition of a business. 

Are you eligible for SBA financing?

To qualify for an SBA loan:

• The business must trade in the US.
• You must invest in the business yourself.
• It must be a for-profit business.
• You must have tried but been unable to source funding from traditional lenders.

You can borrow up to $5 million, which is usually enough for the acquisition of a small or even medium-sized business. 

Benefits of an SBA loan

If you qualify, there are many benefits to using an SBA loan to finance your acquisition:

• Reasonable interest rates.
• Terms of up to 25 years, giving ample time to repay at an affordable monthly premium.
• You need put less down on the acquisition.
• You get help and support from the SBA to succeed as an entrepreneur.

How to apply for an SBA loan

1. Visit the SBA site and find a list of SBA-approved lenders in your area. 
2. Apply through the lender for your SBA loan. The most common type is a 7(a) loan. Expect to provide info like:
   1. The amount of money you want to borrow and its purpose.
   2. A business plan. As you’re acquiring a new business, this should include post-acquisition plans and why it’s the right acquisition for you.
   3. Your financials. They want evidence you’re capable of repaying the loan. Expect to hand over tax filings, balance sheets, P&L statements, and more.
   4. Your experience. They’ll want to see your industry expertise in both your current business and the one you’re about to buy should it be in a different sector.
   5. Your credit history. Again, don’t stress if your record has a few hiccups. The SBA underwrites a portion of loans and therefore can accept some poor credit applications. 
   6. Collateral. How will you collateralize the loan? Will it be stock, property, or other assets? Depending on the lender, you might be able to choose what’s off and on the table collateral-wise.  
3. Follow up with any questions the loan provider or SBA have. 
4. Get your loan.
5. Acquire the business!

Still need help?

View SBA loan details on their website. If you'd like help with another issue, please search the help center again or contact us at support@acquire.com.