SBA 7(a) is the dominant financing tool for California small-business acquisitions in the $300K–$5M range. This guide covers how the program works, what buyers should expect, and how sellers can package deals for clean SBA approval.
What SBA 7(a) covers
Up to $5M loan size, 80–90% loan-to-value coverage of total project cost (purchase price + working capital + closing costs). 10-year amortization on goodwill, 25 years if real estate is bundled into the loan.
Buyer eligibility
US citizen or permanent resident, US-based business, not a passive investment, demonstrated ability to repay (cash flow + management experience), good personal credit (typically 680+), 10–15% down payment minimum, sufficient personal liquidity for 12 months living expenses in reserve.
Interest rates and terms
Variable rate at prime + 2.25–4.75% (depending on loan size and lender). Personal guarantee required from majority owners. Some loans require collateral beyond the business itself depending on lender policy.
Underwriting timeline
Once a buyer is selected and LOI signed, SBA underwriting typically takes 60–90 days end-to-end — including lender approval, SBA approval, real estate appraisal (if applicable), business valuation, and closing document preparation.
Seller packaging requirements
Three years of tax returns and P&Ls, financial normalization with add-back schedule, customer concentration analysis, lease and license documentation, employee status verification, equipment and asset list, vendor contract inventory.
Common SBA deal-killers
Customer concentration over 25%, owner-dependence with no transferable management, sloppy or aggressive add-backs, lease assignability problems, and license-transfer complications (ABC, CSLB, professional licenses).
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