How to use an SBA loan to buy a business under the rules that changed in June 2025

This is the written version of the video above, which I recorded in April 2025, a few weeks before the SBA's new lending rules took effect. It is for anyone who wants to use an SBA loan to buy a business and has never dealt with the SBA before. By the end you will know what changed, what it means for your deal, and what to do about it.

One note before we start. The SBA rewrites its rules. The version I described in the video, SOP 50 10 8, took effect on 1 June 2025. The SBA's SOP 50 10 page now lists version 8.1 as the current one, effective 1 October 2026. Where I give a figure below, it is what I said in the video in April 2025. Read the SBA's current document, or ask your lender, before you count on any of it.

What an SBA 7(a) loan is

SBA stands for Small Business Administration. The 7(a) loan is a government-backed loan that helps people buy small businesses. The bank gives you the money, and the government guarantees part of it. That guarantee is what makes the bank willing to lend to you.

"For years, the SBA 7(a) loan has been the go-to tool for everyday people to buy small businesses."

The SBA's 7(a) loan page says the maximum loan is $5 million, and lists a change of ownership, complete or partial, as an allowed use. In the video I said you can often buy with 10% down or less, that the money can come from investors, that you can get a fixed rate, and that you can have up to 10 years to repay. You do not need to be wealthy to qualify. That is why the loan is so popular.

The ten changes, in one table

Here is what I said was changing on 1 June 2025, and what I told buyers to do about it. The SBA's current rules may differ, so treat this as a map, not the law.

Now let me walk through each one the way I did in the video.

Step 1: Plan to buy 100% of the business

Partial buyouts are basically dead. Say you want to buy 60% of a business and have the seller keep 40%. Under the rules I described, if you buy less than 100% it must be a stock purchase, not an asset deal. And any seller who keeps even 1% must personally guarantee the loan for two years.

"In plain English, partial deals are now basically legal nightmares. So plan on buying 100% instead."

Most sellers do not want to guarantee a loan on a business they just sold. So the simplest path is a full buyout. If you want the seller to stay involved, do it with a consulting agreement or an earn-out, not with equity.

Step 2: Bring real cash as your down payment

A seller note is when the seller lets you pay part of the price over time. In the past you could count part of that note toward your down payment, as long as it sat on standby for two years. Under the rules I described, the note has to be on full standby for the whole life of the loan, usually 10 years. No principal, no interest, until the SBA loan is paid off.

Most sellers will not agree to that. And even if they do, I said a seller note can only cover up to 5% of the equity injection. So at the minimum you need 5% in cash, from you or from an investor, and in practice you should plan on 10%.

"No more stacking of notes and getting in with 1% like we could in the past."

I have seen people get into deals with almost nothing down. The playbook I describe in how to buy a business still works, but the cash part of it is now real cash. The seller note still has a place. It keeps the seller interested in the business working after they leave. It just does not replace your equity anymore.

Step 3: Licences, investors and citizenship

Three more rules touch who can own the business.

Licences. Some businesses, like HVAC, plumbing or pest control, need a licence to operate. Before, the seller could keep a little equity and keep the licence active during the handover. Now, if they keep any equity, they guarantee the loan. And in most states, if they stay on as an employee only, they cannot hold the licence for you. So you need one of three things: the licence yourself, an employee who has it, or a convincing plan to get it fast. Start on this before you sign a letter of intent.

Investors. If outside investors hold even 1% of the equity, from what I read in April 2025, they need to sign or co-sign the loan. Most investors do not want that liability. So you either give them a non-equity return, or you raise the equity separately from the SBA loan. We introduce clients to investors who understand this; Acquisitions.com is an advisory firm and does not lend or fund deals itself. Our roll-up funding page explains how we work with lenders and investors.

Citizenship. Every owner must be a U.S. citizen or a green-card holder. Visa holders, DACA recipients, even a 1% foreign investor, and the deal is dead. Make sure your cap table is clean before you apply.

Step 4: Use the four changes that help you

Not everything got harder. Four changes I described make life easier for buyers.

1. High net worth is no longer a penalty. The SBA used to run a personal liquidity test. If you had too much money, you could be disqualified. That is gone. Lenders can now look at global cash flow: your spouse's income, rental income, income from other businesses. If you are financially solid, that is now a plus.
2. CPA financials are acceptable. Tax returns used to be required for underwriting. If the returns are messy or not available, CPA-prepared or reviewed financials can be used. That matters for businesses on accrual accounting and for fast-growing companies.
3. Small deals get a speed boost. Deals under $500,000 can skip full underwriting if the buyer's SBA credit score is over 155. Faster approvals, less paperwork. I think this opens a big door for first-time buyers testing the waters.
4. Franchise reviews are gone. The SBA no longer reviews franchise agreements, which removes a bottleneck. The catch is that you and your lender are now responsible for checking that the franchise is eligible. Do your homework.

Step 5: Pick a boring, local, profitable sector

With the SBA harder to deal with, choosing the right business matters more than ever. Look for industries that are boring, local and profitable: cleaning services, landscaping, home repair, IT support. Avoid fads. Stick with steady demand.

"Ask yourself: would I be okay owning this business for the next 10 years, even if I am not passionate about it? If the answer is yes, it is probably a strong candidate."

The sectors we see most at Acquisitions.com are home services like HVAC, plumbing and landscaping, healthcare, B2B services and agencies. They tend to have the steady cash flow a lender wants to see.

Step 6: Know where good deals come from

There are three main ways to find a business for sale: online marketplaces like BizBuySell, business brokers, and direct outreach, which means email, LinkedIn and going to owners yourself.

"In my opinion, the best deals are never listed. They come from building relationships, being persistent, and going cold to businesses."

Pick an industry, make a list of businesses, and start a conversation. And remember: if you find a deal directly, you have far more room to use other deal structures that do not need the SBA at all. The buy page shows how we source deals for clients: 15+ marketplaces every day plus off-market introductions.

Step 7: Analyse the deal so you do not overpay

Do not pay for what looks shiny. Look at three things, more closely than ever.

1. Cash flow. Can the business cover your loan payments and still pay you enough to live on?
2. Owner dependency. Can the business run without the current owner? If the owner is the top salesperson and the only licensed technician, you are buying a job.
3. Customer concentration. Are there too few customers? If one or two make up most of the revenue, that is risk the price should reflect.

Always model your DSCR, the debt service coverage ratio. It tells you whether the business can carry the loan you are about to put on it. Our free roll-up calculator runs that sum for one business or several.

Step 8: The first 90 days after you buy

Learn what to do after you buy, because the first 90 days are crucial. On day one, do not shake things up. Build trust with the team first. Understand the operations. Then create quick wins: tighten expenses, renegotiate with vendors, raise prices slightly.

"If I disappear for two weeks, what would break in the business? Fix that first. That is your new job."

Once you know the business, that is also the time to take busywork off your team with software. We wrote a separate guide on AI after an acquisition.

Deals still happen under the new rules. The playbook has changed, and the buyers who learn it inside out are the ones who close. If you want help with your deal, my team and I work with buyers every day. Book a free call and we will build a plan that fits you and the rules as they stand today.