What Is It?
Business acquisition financing helps a qualified buyer purchase an existing, established business. Rather than starting from scratch, the buyer acquires a company with revenue, cash flow, and history. The financing structure is evaluated on the target business's cash flow and the buyer's plan, and may combine several sources — including SBA financing, conventional term loans, seller financing, and the buyer's own equity — into one acquisition structure.
When It May Make Sense
- Acquiring a profitable business with stable, verifiable cash flow
- Buyers with relevant industry or management experience
- Transactions where the business's cash flow can service the acquisition debt
- Deals where a combination of sources creates a workable capital stack
When It May Not Make Sense
- Targets with unverified or unstable cash flow
- Purchase prices unsupported by the business's earnings
- Buyers unable to contribute a required equity injection
- Deals where debt service would consume all available cash flow
What Lenders Typically Evaluate
- Purchase price and business valuation
- Business cash flow and EBITDA
- Debt service coverage from the business's cash flow
- Buyer equity injection
- Buyer experience and credit
- Existing business debt
- Acquisition structure (SBA, conventional, seller financing, equity)
- Industry, concentration, and customer concentration
Potential Benefits
- Acquire revenue and cash flow from day one
- Multiple financing sources can be combined into one structure
- Seller financing can bridge gaps conventional lenders won't cover
- An established business may have assets that support the loan
Risks & Considerations
- Overpaying relative to the business's earnings weakens debt service
- Customer or owner concentration can threaten cash flow after acquisition
- The buyer is responsible for debt regardless of business performance
- Integration and transition risk can affect results
What to Prepare
Common items lenders may request — requirements vary by program and lender.
- Target business financials (typically 3 years) and tax returns
- Interim financials and cash flow statement
- Purchase price and deal terms
- Buyer personal financial statement and credit
- Buyer resume and industry experience
- Proposed acquisition structure and equity source
- Existing debt schedule for the target business
Frequently Asked Questions
EBITDA (Earnings Before Interest, Taxes, Depreciation, and Amortization) is a common measure of a business's operating cash flow. Lenders often use it to assess whether the business's cash flow can service acquisition debt.
An equity injection is the buyer's own cash contribution to the purchase. Many acquisition financing programs require the buyer to contribute a minimum percentage of the purchase price rather than financing 100%.
Seller financing is when the seller accepts part of the purchase price over time rather than all in cash at closing. It can fill a gap conventional lenders won't cover and aligns the seller's interests with the business's ongoing performance.
Explore Your Options
Submit your information and our team will review which available capital structures may be appropriate for your business or project.
Financing is subject to underwriting, eligibility, and approval. Products, terms, and availability vary by program and lender. Submitting information does not guarantee approval or funding. This page is educational and is not financial, legal, tax, or investment advice.