In the US, most small-business acquisitions are financed one of two ways: an SBA 7(a) loan or a conventional bank loan. They suit different buyers.
SBA 7(a): low money down, longer terms
- Up to ~90% LTV — you can buy with around 10% down.
- 10-year terms for a business (longer for real estate).
- Higher rates (often prime + a spread) and more paperwork.
The low equity requirement is the headline: it lets buyers acquire a business they couldn't otherwise afford. The trade-off is a stricter process and a personal guarantee.
Conventional: cheaper, but more equity
- ~70% LTV — you bring more cash.
- Shorter tenure (5–7 years), usually lower rates.
- Faster, less bureaucratic — if you qualify.
The eligibility gate
SBA 7(a) has hard requirements that catch buyers off guard: the buyer must be a US citizen or permanent resident, the business must be an eligible type, and it must meet the size standard. Miss any one and the low-equity option disappears — so confirm eligibility before you build a deal around 10% down.
A practical rule: model both. If the deal only works at 90% LTV, your margin for error is thin — check that the DSCR still holds.