Quick Answer: Loans to Buy a Business
Best acquisition loan: SBA 7(a) — up to $5M, prime + 2.25–4.75%
Down payment required: 10%–20% equity injection
Alternative: Seller financing (5%–8%, 3–7 years)
MFE role: Operational funding after closing
Funding speed (MFE): 24–72 hours
MFE minimum: 6+ months in business, $10K+/mo
Buying a Business: Two Distinct Funding Phases
Getting a loan to buy a business involves a funding structure that most buyers do not fully anticipate before they start the process. The acquisition itself — the purchase price, closing costs, and initial reserves — is handled by one set of lenders. The operational reality after you close is a completely different funding need.
Merchant Fund Express does not provide acquisition loans. The products MFE offers — working capital, MCA, equipment financing, and lines of credit — are operational tools for businesses already in operation. If you are buying a business, start with an SBA lender or seller financing for the purchase itself. Once the business is yours and operating, MFE can provide fast capital for day-to-day needs.
This guide covers both phases with honest detail on requirements, timelines, and what to expect at each stage.
Phase 1: Acquisition Financing Options
SBA 7(a) Business Acquisition Loan
The most common financing tool for buying an existing business. The SBA guarantees up to 85% of loans under $150,000 and 75% of larger loans, enabling banks to offer better terms than conventional products.
- Max amount: $5 million
- Rate: Prime + 2.25%–4.75%
- Term: Up to 10 years
- Down payment: 10%–20%
- Credit score: 680+
- Timeline: 60–90 days
Best for: Most business acquisitions under $5M with strong seller financials
Seller Financing (Seller Carryback)
The seller accepts a promissory note for a portion (usually 10%–30%) of the purchase price. You make monthly payments to the seller at negotiated interest, typically 5%–8% over 3–7 years. This reduces the bank loan needed and signals mutual confidence in the deal.
- Typical amount: 10%–30% of purchase price
- Rate: 5%–8% (negotiated)
- Term: 3–7 years
- Down payment: Reduces bank requirements
- Timeline: Closes with deal
Best for: Deals where seller is motivated and trusts the buyer
ROBS — Retirement Fund Investment
Rollover for Business Startups allows you to invest qualified retirement funds (401k, IRA) into a new business without tax penalties. The structure requires forming a C-corp and establishing a plan — no debt, no monthly payments.
- Max amount: Your retirement balance
- Cost: $5,000–$10,000 setup + ~$1,500/yr maintenance
- Debt created: None
- Risk: Retirement savings at risk if business fails
- Timeline: 3–4 weeks
Best for: Buyers with substantial retirement savings who prefer no debt
Conventional Business Acquisition Loan
Traditional bank loans for business acquisition without SBA guarantee. Available from community banks and credit unions with existing relationships. Faster than SBA in some cases, but higher rates and stricter collateral requirements.
- Max amount: Varies by lender
- Rate: Prime + 1%–6%
- Term: 5–10 years
- Down payment: 20%–30%
- Timeline: 30–60 days
Best for: Buyers with strong banking relationships and significant collateral
What Lenders Look for in a Business Acquisition Loan
Whether applying for an SBA 7(a) loan or a conventional acquisition loan, lenders evaluate both the target business and the buyer. Key criteria include:
The Business Being Acquired
- At least 2 years of operating history
- Positive cash flow and DSCR (Debt Service Coverage Ratio) of 1.25x or higher
- Clean, reviewed or CPA-compiled financial statements
- Business valuation supporting the purchase price
- No pending litigation, regulatory issues, or major customer concentration
The Buyer
- Personal credit score 680+ (SBA), 700+ (conventional)
- Relevant industry experience or management background
- Personal financial statement showing net worth and liquidity
- Ability to inject 10%–20% from non-borrowed funds
- Personal guarantee (required for all SBA loans)
The Cash Flow Gap After Buying a Business
One of the most common mistakes new business owners make is underestimating the working capital needed immediately after closing. The acquisition loan is not the end of the funding conversation — it is the beginning.
After buying a business, new owners routinely face these immediate cash demands:
- Inventory restocking: The seller may have reduced stock before closing. Rebuilding inventory to full capacity can require $10,000 to $100,000+
- Payroll gaps: Revenue may lag for 30–90 days as you build customer confidence under new ownership
- Equipment repairs or upgrades: Due diligence often uncovers deferred maintenance the seller did not disclose
- Working capital reserve depletion: The acquisition loan may have consumed your liquidity
- Vendor payment terms: New owners often lose favorable payment terms the previous owner had and must pay on delivery until trust is established
This is the gap where MFE's products are most useful. Once the business is operating under your ownership with 6+ months of documented revenue, MFE can provide fast operational capital when you need it.
How MFE Helps After You Buy the Business
Merchant Fund Express does not fund acquisitions. What MFE does is provide fast operational capital for established businesses — which is exactly what a new owner needs when cash flow tightens after closing.
Working Capital
Cover payroll, inventory gaps, and operational expenses while the business stabilizes under new ownership. Funding in 24–72 hours.
Details →Equipment Financing
Post-acquisition equipment needs — repairs, replacements, or upgrades that weren't in the deal — financed up to 60-month terms.
Details →Merchant Cash Advance
For businesses with card sales. Advance based on future revenue; repayments flex with daily sales volume — no fixed monthly obligation.
Details →Business Line of Credit
Revolving access to capital you draw when needed. Pay interest only on what you use. Ideal for managing irregular post-acquisition cash cycles.
Details →Revenue Based Financing
Fixed ACH payments as a percentage of monthly revenue. Predictable repayment structure for new owners who want to budget precisely.
Details →Invoice Factoring
B2B businesses with outstanding invoices can convert receivables to immediate cash — critical when vendor terms change after ownership transfer.
Details →Related Resources
Frequently Asked Questions
What is the best loan to buy a business?
For most small business acquisitions, the SBA 7(a) loan is the most widely used option — offering up to $5 million with lower rates and longer terms than conventional loans. Seller financing is also common and can be combined with SBA financing to reduce the cash needed at closing.
How much down payment do I need to buy a business?
SBA 7(a) loans require 10%–20% equity injection. Some sellers will finance a portion, reducing the cash you need from a lender. Total out-of-pocket typically ranges from 10% to 30% of the purchase price depending on the structure.
Can I use an SBA loan to buy an existing business?
Yes. The SBA 7(a) program explicitly allows financing for existing business acquisitions (change of ownership). The business must have been operating for at least 2 years, and the purchase price must be supported by a business valuation.
Does MFE offer loans to buy a business?
No. Merchant Fund Express does not provide acquisition financing. MFE focuses on operational funding for businesses already in operation — working capital, MCA, equipment financing, and lines of credit that help new owners manage the business after taking over.
What is seller financing and how does it work?
Seller financing (seller carryback) means the seller accepts a portion of the purchase price over time rather than in a lump sum at closing. The buyer makes monthly payments to the seller, typically at 5%–8% interest over 3–7 years. It reduces the amount needed from a bank and signals seller confidence in the business.
How long does it take to get a loan to buy a business?
SBA 7(a) acquisition loans: 60–90 days. Conventional bank loans: 30–60 days. ROBS (retirement fund investment): 3–4 weeks. Seller financing terms are negotiated during due diligence and can close with the deal itself.
What documents do I need to apply for a business acquisition loan?
Typical requirements include: 2–3 years of the target business's tax returns and financial statements, a business valuation or appraisal, your personal tax returns and financial statement, a business plan with acquisition rationale and projections, and purchase agreement or letter of intent.
How does MFE help after I buy a business?
After closing, many new owners face immediate cash flow challenges — inventory needs, payroll gaps, equipment repairs, and revenue lag while transitioning customers. MFE provides working capital loans, merchant cash advances, and equipment financing for businesses with 6+ months of operation and $10,000+/month in revenue.