Choosing a lender: SBA and the other options

The short version

• Most buyers of small businesses borrow part of the price. Choosing the right lender matters as much as choosing the right business.
• The main options are SBA-guaranteed loans, conventional bank loans, credit unions and community banks, non-bank lenders and financing from the seller.
• SBA 7(a) loans are widely used for business purchases. They allow up to $5 million, longer terms and a smaller down payment than many conventional loans, with stricter rules.
• If the purchase includes the building, an SBA 504 loan can finance the real estate alongside a 7(a) loan. Since July 4, 2026, the two together can reach $10 million.
• Pick a lender that closes business acquisition loans regularly. Experience saves weeks.
• An SBA loan advisor can shop your loan to many lenders at once and run the process to closing. On SBA loans, the lender often pays their fee.
• Talk to two or three before you need one.

Why the lender matters so much

A lender does more than lend. It reviews the business you want to buy, orders its own valuation, sets conditions and sets the pace of your closing. A lender that rarely finances business purchases can slow a deal or lose it.

The options

SBA 7(a) loans. Private lenders make these loans, and the U.S. Small Business Administration guarantees part of them. They can be used to buy an existing business, up to $5 million. For a business purchase, the buyer must put in at least 10 percent of the total cost of the purchase from their own funds. Fees paid to an SBA loan advisor do not count toward it. The rules are detailed: the lender orders an independent valuation on most purchases, tests whether the business can cover its loan payments and requires personal guarantees from owners. Lesson 2.4 covers guarantees.

SBA 504 loans. Long-term, fixed-rate loans for major fixed assets: owner-occupied real estate and long-life equipment. They are made through Certified Development Companies, nonprofit partners that the SBA certifies and regulates, working alongside a bank. A 504 loan cannot pay for goodwill, inventory or working capital, so it does not buy the business itself. It buys the building or heavy equipment that comes with it.

Conventional bank loans. Loans without an SBA guarantee. Terms are set by each bank. They often require a larger down payment and shorter repayment, but can be simpler and faster when the buyer and the business are strong.

Credit unions and community banks. Smaller lenders that may know your local market well. Some make SBA loans, some make conventional loans and some do both. Experience with business purchases varies widely.

Non-bank lenders. Lending companies that are not banks. Some are approved to make SBA loans. Terms and costs vary, so compare carefully.

Seller financing. The seller lets you pay part of the price over time. It is often combined with a bank or SBA loan rather than used alone. Lesson 6.4 covers seller notes and the SBA rules on them.

Some buyers also use retirement savings to fund their share. Lesson 3.1 covers how buyers pay, including that option.

If real estate is part of the sale

Many businesses own the building they operate from. Buying both changes how the purchase is financed.

A 7(a) loan can include real estate. The real estate portion can be repaid over a longer period, up to 25 years, than the business portion, which is capped at 10 years. But everything counts against the 7(a) limit of $5 million.

A 7(a) loan and a 504 loan can be combined. Starting July 4, 2026, under a new SBA rule, a buyer who secures a 7(a) loan first can also borrow up to $5 million through the 504 program, for up to $10 million in combined SBA-backed financing. Before that date, the two programs shared a single $5 million limit.

In practice, the 7(a) loan finances the business itself: goodwill, equipment, inventory and working capital. The 504 loan finances the building. That keeps more of your 7(a) limit for the business.

A 504 loan usually needs its own down payment from you, often around 10 percent of the real estate cost, and runs on its own approval timeline. Ask your lender how the two would fit together.

Lesson 3.5, When real estate comes with the business, covers the numbers in more detail. Some buyers lease the building from the seller instead of buying it.

What makes a good acquisition lender

• They close business purchases often, not only real estate or equipment loans.
• They know your industry, or are comfortable with it.
• They can make decisions quickly. For SBA loans, lenders approved by the SBA to make many decisions themselves can move faster.
• They explain their process, timeline and conditions up front.
• They are clear about what they need from you and from the seller.

The SBA's own website has a matching tool that connects borrowers with participating lenders.

SBA loan advisors

Some buyers do not approach lenders one at a time. They hire an SBA loan advisor, sometimes called an SBA loan broker, to do it for them.

A good one will:

• Review your deal early, often before you sign a letter of intent, and tell you how lenders are likely to see it.
• Suggest a structure: how much cash you put in, whether a seller note helps and how the loan fits together.
• Prepare a lender-ready package: a summary of the deal, the numbers and the story behind them.
• Shop the loan to the lenders most likely to approve a deal like yours, then compare their terms.
• Manage the process with the lender through underwriting, due diligence and closing.

Their value is knowing which lenders are actively making acquisition loans, in which industries and at what size. That changes month to month, and most buyers cannot see it from the outside.

How they are paid. On SBA loans, the advisor's fee is often paid by the lender at closing rather than by you. On conventional or private loans, the buyer usually pays, often as a fee at closing. SBA rules require fees paid to anyone who helps a borrower get an SBA loan to be disclosed in writing on SBA Form 159. Ask to see it.

What to watch for. Some advisors ask for exclusivity, meaning you agree not to approach lenders on your own while they shop your loan. Ask whether they are paid the same amount by every lender they might send you to. An advisor who is paid more by one lender may not be steering you to the best fit.

An SBA loan advisor is different from a buy-side advisor, who helps you find and evaluate businesses. Lesson 2.3 covers buy-side help. Some buyers use both.

Compare before you commit

Talk to two or three lenders. Compare the rate, fees, down payment, repayment term, collateral required and how long they expect the loan to take. Lesson 3.3 covers getting pre-qualified.