What is a business acquisition loan?

A business acquisition loan provides financing to purchase an existing business. SBA 7(a) loans are the most common financing tool for acquisitions, offering up to $5 million with 10% down in many cases. Conventional bank loans may require 20–30% down. The acquired business's cash flow is the primary source of loan repayment, so lenders scrutinize historical financials, customer concentration risk, and the management transition plan. Seller financing (where the seller takes a note for part of the purchase price) is common and demonstrates the seller's confidence in the business. Due diligence is critical — review tax returns, contracts, customer relationships, and liabilities thoroughly.