The common ways deals are financed
SBA 7(a): a frequent choice for buying a business or a partner's share, because longer terms keep payments manageable. Program rules cover equity injection, valuation and seller notes, so the lender guides structure and applies current SBA rules (SOP 50 10 8.1, effective October 1, 2026).
Conventional bank loan: possible when the business and buyer are strong and there's solid collateral. Often a shorter term than SBA.
Seller financing: the seller carries part of the price as a note, paid over time. It lowers the cash needed up front and shows the seller believes in the business.
Cash-out refinance: when the business or its owners hold real estate, refinancing the property can fund a partner's exit.
What lenders want to see
Cash flow: the business's tax returns and financial statements, showing it can carry the new debt after paying the owners a reasonable salary.
Valuation: a defensible price, often supported by an independent business valuation.
The buyer: relevant industry or management experience, credit, and personal financial statement.
Equity: the buyer's own money in the deal. How much is required depends on the program and the structure.
The paperwork: a letter of intent or purchase agreement, and for a partner buyout, the operating or partnership agreement.
Partner buyouts are their own animal
Buying out a co-owner often means the remaining owner takes on debt to pay the departing one. Lenders want clarity on the price, how it was set, whether the departing partner will stay involved for a transition, and what happens to any existing guarantees.
Getting the operating agreement and the buyout terms in writing early saves time. If the partners disagree on the price, a third-party valuation usually settles it faster than negotiation.
Timing and expectations
Acquisition financing takes longer than working capital because of valuation, due diligence and, for SBA loans, program processing. Plan for weeks, and keep the purchase agreement's closing date realistic.
Common mistakes that slow a deal
Signing a purchase agreement with an unrealistic closing date. Relying on the seller's add-backs without documentation. Missing years of tax returns or financial statements. Not checking for liens, unpaid taxes or lawsuits against the business before signing. Skipping a clear transition plan with the seller. Each of these can be fixed, but catching them before you sign keeps the lender, the seller and you on schedule. A Capital Position Report can surface public-record issues early.
Acquisition financing options
| Option | Strength | Consideration |
|---|---|---|
| SBA 7(a) | Long term, lower payment | More paperwork and processing time |
| Bank loan | Can be simpler for strong deals | More collateral, shorter term |
| Seller note | Less cash up front | Seller must agree and lender must allow it (SBA standby rules apply) |
| Cash-out refinance | Uses property equity | Requires owned real estate |
Common questions
Can I buy a business with no money down?
It's rare. SBA lenders expect equity from the buyer. A seller note can count toward part of it only if it's on full standby, meaning the seller takes no payments for the life of the SBA loan, and even then only up to half of the required equity injection. The lender applies current SBA rules.
Can an SBA loan be used for a partner buyout?
Yes. SBA 7(a) loans can finance buying out a partner, structured as a purchase of their ownership interest. The remaining owners generally guarantee the loan, and the lender applies the SBA's current change-of-ownership rules.
Do I need a business valuation?
For most acquisition and buyout loans, yes. It supports the price, and lenders often require one, particularly when goodwill makes up much of the price.
Related
We're commercial lending advisors based in Lafayette, Louisiana. We look at your business the way a lender will, using what you share plus a free Capital Position Report built from public records, then match you to the best-fit programs across our lender network. We arrange financing for businesses nationwide, except in California.
Pre-qualifying takes about two minutes, has no credit impact and no obligation. Lenders pay our fee when a loan funds; here's exactly how we get paid.
General education, not legal or tax advice. Requirements, terms and timing vary by lender and program. Capco Capital is a commercial lending advisory firm operated by Capco Capital LLC. We arrange financing through third-party lenders as a loan broker and are compensated by the lender when a loan funds. We are not a lender and are not affiliated with the U.S. Small Business Administration.
