Using an SBA 7(a) Loan to Buy a Business

SBA 7(a) loans — the most popular of the U.S. Small Business Administration loans — can be a good option for business acquisitions, offering competitive interest rates and long repayment terms.

Why use an SBA loan to buy a business?

SBA 7(a) loans are the most flexible type of SBA loan and can be used for a variety of purposes, including buying a business. But they won’t be a great fit for everyone looking to acquire a business. Here are some reasons why an SBA loan may or may not make sense for you:

» If you want to consider other options: Read our breakdown of the best business acquisition loans.

Who can use an SBA loan to buy a business?

The SBA refers to a business acquisition as a “change of ownership,” which includes the purchase of an existing business or an increased ownership share in your current business. You can use an SBA 7(a) loan for ownership changes in the following scenarios:

New ownership

• A small business purchases 100% of the ownership interest in another business.

• An individual who is not an existing owner purchases 100% of the ownership interest in the business.

• A small business acquires another small business through an asset purchase.

• An Employee Stock Ownership Plan (ESOP) or equivalent trust purchases a controlling interest (51% or more) in the employer small business.

Existing ownership

• One or more current owners purchases the entire interest of another current owner, resulting in 100% ownership of the business by the remaining owner(s)

  ^[1]

  U.S. Small Business Administration. Lender and Development Company Loan Programs SOP 50 10 7. Accessed Jun 19, 2026. View all sources .

The SBA also requires that any change of ownership promotes the development and/or preserves the existence of the business.

How do I qualify for an SBA acquisition loan?

To qualify for an SBA business acquisition loan, you’ll need to meet eligibility criteria from the SBA as well as your lender.

General SBA loan requirements 

First, you’ll need to meet general SBA loan requirements, including:

• You must be a for-profit business.

• You must be located and doing business in the U.S. or its territories.

• You must be operating in an eligible industry.

• You must be a small business, as defined by the SBA.

• You need to have tried to find other forms of financing before turning to an SBA loan.

• As a business owner, you must have invested time and money into the business. 

SBA business acquisition loan requirements

When an SBA loan is used to purchase a business or buy out partners, the SBA also requires one of the following, depending on which applies to your situation:

• You’re an outside buyer purchasing an existing business: You’ll need to put in at least 10% of the total cost from your own funds. Say, for example, the business you’re buying costs $1 million. You’ll need to put $100,000 of your own money in, and the SBA loan will cover the rest. This includes all costs required to complete the change of ownership, regardless of the source of funds.

• You’re an existing co-owner buying out a partner(s): If you already own part of the business you’re purchasing, you can borrow up to 100% of the buyout cost — no cash of your own required. But to do so, the following must be true:

  • You’ve been actively running the business and have owned the same or a larger share of it for at least the last two years.  

  • The business doesn’t already have a ton of debt. Specifically, the business balance sheets for the most recently completed fiscal year and current quarter must reflect a debt-to-worth ratio of no greater than 9:1 prior to the change in ownership. Put plainly, the business can’t owe more than $9 for every $1 of value it owns.

If you can’t prove both of these, the remaining owners must put in 10%, similar to the new buyer stipulation

^[2]

U.S. Small Business Administration. Lender and Development Company Loan Programs. Accessed Jun 19, 2026. View all sources .

SBA loan underwriting requirements

SBA lenders, typically banks and credit unions, set their own minimum qualifications but generally use the following criteria to evaluate loan applications:

Personal credit history

You’ll need to have good credit to qualify for an SBA loan. Lenders will usually want to see a personal credit score of 650 or higher. Strong credit signals to a lender that you have a record of reliably taking on debt and paying it off on time. The stronger your credit history, the likelier your loan application will be considered.

Time in business

Most SBA lenders require that you have at least two years in business. You should have an established company or be looking to buy an established company to qualify for a business acquisition loan. This proves to the lender that you or the business you’re purchasing have staying power. About 32% of small businesses fail within the first two years, according to the U.S. Small Business Administration Office of Advocacy

^[3]

The Office of Advocacy. Frequently Asked Questions About Small Business. Accessed Jun 19, 2026. View all sources . So the more time in business you can show, the stronger your application profile will be to a lender.

Business finances

Lenders want to see that you have strong business finances that show your ability to repay the loan, including annual revenue and cash flow projections. The lender will also want to see your financial history to ensure that you can responsibly manage the business acquisition while taking on new debt.

Collateral

SBA 7(a) loans are almost always secured with collateral. This offers the lender some protection of the money borrowed. If you end up not being able to pay off your loan, which means it goes into default, then the lender can take the assets you pledged as collateral to recover the remaining debt. Real estate, equipment and inventory can all be used as forms of collateral.

» MORE: What lenders really look at when you apply to buy a business

How do I apply for an SBA business acquisition loan?

If you think an SBA loan is a good fit for your business acquisition, you’ll want to start the application process by finding a lender. Here’s the list of steps we recommend following to find an SBA lender:

1. Start your search with a local bank or credit union in your area. These are likely to offer you the most favorable interest rates and terms, especially if you have a preexisting relationship with them.

2. Use the Lender Match tool on the SBA’s website. With Lender Match, you submit some basic information about your business and in two days, you receive an email with possible lender matches.

3. Consider NerdWallet’s list of the best SBA lenders, which ranks the top banks issuing SBA 7(a) loans by approval number and average loan size. You can even see which bank is the biggest SBA lender in your state.

Once you’ve found a lender, you’ll be able to work on preparing and submitting your application. Although the required documentation can vary from lender to lender, you’ll typically need to provide the following:

SBA business acquisition loan documents

• SBA Form 1919, Borrower Information Form.

• SBA Form 413, Personal Financial Statement.

• SBA Form 148, Unconditional Guarantee (or the lender’s equivalent).

• A current business valuation.

• An analysis detailing how the change of ownership will promote the development and/or preserve the existence of the business.

• Business asset or stock purchase agreement.* 

• Seller’s financial information.

Standard business loan documents

• Business financial statements (balance sheets, profit and loss statements, cash flow projections).

• Ownership and affiliations.

• Business certificate or license.

• Loan application history.

• Income tax returns.

• Resumes for each business owner.

• Business overview and history.

• Business lease.

• Existing debt schedule, if applicable.

• Collateral information.

*An asset purchase agreement itemizes each specific business asset, along with its value, that’s transferring to your ownership. With an asset purchase, you buy all the physical aspects of the business (equipment, inventory, branding, etc.) but not the entity itself. A stock purchase agreement covers shares and transfer of ownership. It means you’re buying the entity in its entirety, including any legal or regulatory issues and undisclosed debt. For this reason, stock purchase agreements require more due diligence on the part of the lender — which increases the necessary documentation and potentially adds time to the process.

After you’ve submitted your application, you’ll wait for approval. If your SBA lender is a Preferred Lending Partner (PLP), you may receive a decision faster — as these lenders can make credit decisions without sending applications through the SBA. Overall, time to funding typically ranges from 30 to 90 days.