Business Acquisition Loans: How They Work, Rates, and How to Qualify.
Acquisition financing is its own world. The structure you choose determines your interest rate, your personal guarantee exposure, your closing timeline, and whether you can refinance in five years. Here's the field guide.
Five loan structures, compared
| Structure | Rate | Down | Close |
|---|---|---|---|
| SBA 7(a) | P + 2.25–2.75% | 10–20% | 45–90 days |
| Conventional bank | 7–10% | 20–30% | 30–60 days |
| Seller financing | 5–8% | 10–30% | Closes with deal |
| Bridge loan | 10–15% | 15–25% | 7–21 days |
| Revenue-based | 9–20% effective | None | 24–72 hours |
When each structure wins
SBA 7(a) dominates for buyers who can wait 60 days and want the lowest cost of capital. 90% of small-business acquisitions in North America use SBA — for good reason.
Conventional bank is best for buyers with a strong existing banking relationship and an acquisition target the bank already underwrites comfortably (existing customer, well-known industry).
Seller financing closes deals when other structures fall through. A motivated seller will finance 10–30% of the price at 5–8% interest, often standing behind senior debt.
Bridge loans fund acquisitions where you'll refinance into SBA or conventional debt within 6–12 months — used when timing forces a fast close.
Revenue-based capital fills working-capital gaps post-close, not the acquisition itself. Pair with SBA or seller financing for the purchase, RBF for first-90-day operating cash.
Lender requirements
- 3+ years of personal tax returns — lenders want to see your existing income, not just the acquisition target's.
- 3+ years of target business financials — taxes, P&L, balance sheet, A/R aging.
- Personal financial statement (SBA Form 413) — net worth, debts, real estate.
- Resume or business plan — most SBA lenders want to see relevant operating experience.
- Down-payment proof — 30 days of bank statements showing the equity injection is real.
Seven-step application process
- Pre-qualification — soft credit pull, target deal size, structure recommendation.
- Lender match — quote 3–5 lenders simultaneously for fastest term-sheet comparison.
- Application + docs — typically 30 documents on the SBA standard list.
- Lender review — 2–4 weeks for SBA, 1–2 weeks for conventional.
- Term sheet — focus on rate, term, prepayment, covenants, personal guarantee.
- Closing diligence — appraisals, legal, escrow, insurance binders.
- Funding + first payment — wire to seller and start the amortization schedule.
Common mistakes
- Shopping rate without shopping structure — a 0.5% rate difference matters less than 5 vs 10-year term.
- Underestimating closing timeline — sellers walk when SBA drags into month four.
- Skipping the bridge plan — if SBA falls through 30 days from close, bridge financing is your only option.
- Ignoring personal guarantee language — most SBA loans require full PG; some conventional bank loans don't.