First-time buyers often assume they need the full purchase price in cash. In practice, an acquisition is usually assembled from three or four sources, and knowing the structure early tells you what size business you can realistically pursue.
SBA 7(a) loans
The SBA 7(a) program is the backbone of small business acquisition lending. Lenders typically look for a buyer equity injection, relevant management experience, and a business whose cash flow covers debt service with room to spare. Getting pre-qualified before you tour businesses saves everyone time and makes your offer credible.
Seller financing
A seller note covering part of the price is common and often required by the lender. Beyond financing, it signals that the seller believes the business will keep performing after they leave — which is exactly what a lender wants to see.
Working capital is not optional
Buyers who use every available dollar on the purchase price start ownership without a cushion. Plan for payroll, inventory, and the transition period before the first strong month arrives.