Aquisition Loan
Business Acquisition Loans: Finance Your Next Company Purchase
Acquiring a business is one of the fastest paths to significant revenue growth — you get customers, cash flow, infrastructure, and brand equity from day one. Business acquisition loans provide structured financing to close deals ranging from Main Street purchases to complex middle-market transactions, with terms aligned to the acquired business's earnings power rather than the buyer's existing balance sheet.
What Is a Business Acquisition Loan?
A business acquisition loan is financing specifically structured to fund the purchase of an existing business, a franchise, or a controlling interest in a company. Unlike working capital loans that fund operations, acquisition loans are transaction financing — capital deployed to complete a specific purchase and repaid over the acquired business's productive life using its own earnings.
Acquisition loans are underwritten differently from standard business loans. Lenders focus heavily on the target business's historical cash flow (EBITDA), the purchase price relative to earnings (price-to-EBITDA multiple), the buyer's management experience, and the terms of the purchase agreement. The acquired business's ability to service the debt from its own cash flow is the primary repayment source.
The most common acquisition financing is the SBA 7(a) program, which guarantees up to $5M for business acquisitions, franchise purchases, and partner buyouts. Per SBA 7(a) program guidelines, business acquisitions are an explicitly eligible use. Crestmont structures acquisition financing across multiple programs.
How It Works: Step by Step
Who Qualifies?
| Requirement | Typical Threshold | Notes |
|---|---|---|
| Target Business DSCR | 1.25x minimum after debt service | Acquired business cash flow must cover loan payments |
| Buyer Management Experience | Industry or management experience required | SBA requires buyer's personal resume and background |
| Buyer's Personal Credit | 680+ preferred | Personal guarantee required for most acquisition loans |
| Down Payment / Equity | 10-30% typically required | SBA 7(a) often requires 10% on acquisitions |
| Seller Financing | Often requested by SBA lenders | Seller note of 10-15% demonstrates confidence |
| Business Operating History | Target must have 2+ years financials | Lenders need historical performance data |
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Apply Now →Rates, Fees, and Terms
| Cost Factor | Typical Range | What to Know |
|---|---|---|
| SBA 7(a) Rate | Prime + 2.75%-3.75% (~11-12% currently) | Maximum SBA-allowed rate |
| Conventional Acquisition Loan | 6%-15% APR | Bank or alternative lender programs |
| SBA Loan Amount | Up to $5,000,000 | Guaranteed portion up to $3.75M |
| Term Length | 10-25 years | Longer terms for higher amounts with real estate |
| SBA Guarantee Fee | 0.5%-3.5% of guaranteed portion | Based on loan size and term |
| Down Payment | 10%-30% | 10% minimum for SBA-eligible transactions |
Key Benefits
Immediate Revenue and Cash Flow
Unlike startups building revenue from scratch, acquired businesses generate cash flow from day one. Acquisition financing lets you deploy capital to purchase an asset that immediately produces income to service the debt.
SBA-Backed Terms
SBA 7(a) acquisition loans offer 10-year terms with 10% down at regulated rates — among the most favorable acquisition structures available to U.S. small businesses.
Seller Financing Integration
Well-structured acquisitions often include a seller note — the seller carries 10-20% of purchase price as a subordinated loan. This reduces buyer cash at closing, demonstrates seller confidence, and provides lenders additional security.
Franchise Purchase Eligibility
SBA acquisition loans explicitly fund franchise purchases for approved franchise systems, combining favorable program terms with historical performance data to support underwriting.
Business Acquisition Loan: Deal Structure
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Check My Options →Real-World Use Cases and Scenarios
The Main Street Acquisition
A marketing executive buys a $450,000 landscaping company with $120,000 EBITDA and 200 established clients. An SBA 7(a) loan provides $405,000 (90%) at 10.5% over 10 years; the buyer contributes $45,000 as equity. Business cash flow covers $65,000 annual loan payments, leaving $55,000 for owner salary and reinvestment.
The Strategic Bolt-On
An HVAC company acquires a competitor with $1.8M in revenue for $900,000 — a 5x EBITDA multiple. Structured with 15% seller financing and conventional bank financing at 8.5%, the deal closes in 6 weeks. Combined revenue exceeds $4.5M post-close with eliminated duplicate overhead.
The Franchise Purchase
A couple purchases a $350,000 fast-casual restaurant franchise using an SBA 7(a) loan. The franchise is SBA-approved; financing covers franchise fee, equipment, leasehold improvements, and 6 months working capital.
How It Compares to Other Financing Options
| Product | Approval Speed | Rate Range | Best For |
|---|---|---|---|
| SBA 7(a) Acquisition | 4-8 weeks | Prime+2.75-3.75% | Best terms, 10% down, $5M max |
| Conventional Bank Acquisition | 3-6 weeks | 6%-12% APR | No SBA guarantee, stricter credit |
| Alternative Acquisition Loan | 1-3 weeks | 10%-20% APR | Faster, less documentation, higher rate |
| Seller Financing Only | Negotiated | 5%-8% typical | No lender, seller carries all paper |
| Private Equity / Rollup | 1-3 months | Equity-based | Loss of ownership, larger deals |
| Bridge Loan | 5-15 days | 8%-18% APR | For acquisition timing gaps only |
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Apply Today →Tips for Getting Approved and Getting the Best Terms
- Get pre-qualified before you shop: Knowing your financing capacity defines the price range of businesses you can realistically acquire. Pre-qualification signals seriousness to sellers and accelerates closing.
- Request 3 years of seller financials: Lenders require 3 years of tax returns and P&Ls from the target. Patterns in revenue, expenses, and owner compensation reveal the real story.
- Normalize seller financials: Add back personal expenses, one-time costs, and excess owner compensation to determine true EBITDA before offering a price.
- Negotiate seller financing: A seller note of 10-15% reduces cash-at-closing and demonstrates seller confidence in the transition.
- Plan the ownership transition: Document how you'll retain key employees, customers, and suppliers. Lenders evaluate your transition plan — it's the biggest risk period for any acquisition.
- Use a good M&A attorney: Acquisition closing documents are complex. Experienced M&A counsel protects your interests in purchase agreements and non-compete provisions.
Why Choose Crestmont Capital
Crestmont Capital has structured acquisition financing across dozens of industries and transaction sizes. Our team understands deal structuring, SBA program optimization, seller financing integration, and closing timeline management.
- SBA expertise: We navigate SBA 7(a) acquisition requirements to maximize the guarantee and minimize out-of-pocket closing costs.
- Deal structure guidance: We advise on optimal financing mix — SBA vs. conventional, seller note sizing, down payment minimization.
- Speed when needed: Alternative acquisition loan programs close in 2-3 weeks when SBA timing doesn't fit seller requirements.
Related: bridge loans for acquisition timing gaps, working capital lines post-acquisition, and commercial financing for real estate included in the acquisition.
Frequently Asked Questions
Can I buy a business with no money down?
True zero-down acquisition financing is extremely rare. SBA 7(a) typically requires 10% buyer equity injection. However, seller financing (where the seller carries a subordinated note of 10-15%) can minimize cash-at-closing while satisfying SBA equity injection requirements.
How do lenders determine how much I can borrow for an acquisition?
Lenders analyze the acquired business's EBITDA and calculate how much debt the business can service at their required coverage ratio (typically 1.25x DSCR). The purchase price is also evaluated as an EBITDA multiple — typically 3-6x for Main Street businesses.
Does SBA 7(a) really fund business acquisitions?
Yes. Business acquisitions, franchise purchases, and partner buyouts are explicitly eligible uses of SBA 7(a) loan proceeds. The SBA guarantee enables lenders to offer 10-year terms and 10% down payments that conventional financing can't match.
What happens to employees when I buy a business?
Employment continues under the new owner. Most purchase agreements include employee retention provisions. Your business plan for the acquisition should address workforce continuity — lenders view it as essential to ongoing business value.
How long does a business acquisition loan take to close?
SBA 7(a) acquisitions: 4-8 weeks. Conventional bank: 3-6 weeks. Alternative lender programs: 2-3 weeks. Build timeline expectations into your purchase agreement's closing deadline.
Can I get an acquisition loan if I've never owned a business?
Yes, but relevant industry or management experience is important. A strong resume demonstrating related experience, or a seller transition agreement where the previous owner stays on temporarily, supports first-time buyer approval.
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Get Funded Now →Disclaimer: The information provided on this page is for general educational purposes only and is not financial, legal, or tax advice. Funding terms, qualifications, and product availability may vary and are subject to change without notice. Crestmont Capital does not guarantee approval, rates, or specific outcomes. For personalized information about your business funding options, contact our team directly.
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