What credit score do I need to get an SBA loan to buy a business?

Most SBA lenders require a minimum personal credit score of 680, though many prefer 700 or higher for business acquisitions. Beyond the score, lenders evaluate your debt-to-income ratio, liquidity (they want to see you have reserves beyond the down payment), and relevant industry or management experience. A score of 650 may still qualify with strong compensating factors, but expect a higher scrutiny level and potentially higher interest rate — SBA 7(a) rates currently run in the 10.5–13% range depending on the lender and loan structure.

How long does it typically take to close a business purchase?

Most small business acquisitions take 60–120 days from accepted LOI to close, with SBA-financed deals often taking 90–120 days due to lender processing time. All-cash deals or seller-financed deals can close faster, sometimes in 30–45 days if due diligence is clean. The biggest delays are usually lender appraisals, landlord consent for lease assignments, and license transfers — which is why experienced buyers start those processes as early in due diligence as possible rather than waiting for full approval.

Should I buy the assets of a business or the stock/ownership entity?

In most small business transactions under $2 million, buyers strongly prefer an asset purchase because it provides a clean break from prior liabilities, allows you to step up the tax basis of assets for depreciation purposes, and gives you more control over which liabilities you're assuming. Stock purchases are more common in larger deals or when the business holds licenses, contracts, or permits that can't easily be transferred outside the entity. Your CPA and attorney should model the tax impact of both structures before you negotiate — the difference in after-tax economics can be $20,000–$75,000 on a mid-sized deal.

What is seller financing and should I ask for it?

Seller financing means the seller agrees to accept a portion of the purchase price over time rather than entirely at closing — typically 10–30% of the total price at 6–8% interest over 3–7 years. You should almost always ask for it, because it accomplishes two things: it reduces the cash you need at closing, and it creates a financial incentive for the seller to ensure a smooth transition (they don't get fully paid if the business fails). Sellers who flat-out refuse any seller financing in a deal under $2 million sometimes raise a question worth exploring — why are they not willing to stand behind the business's continued performance?

What's the most common mistake first-time business buyers make?

The most common and costly mistake is skipping or rushing due diligence because the buyer gets emotionally attached to the deal. Specifically, many first-time buyers accept a seller-prepared P&L at face value without cross-referencing it against tax returns and bank statements — and those documents frequently tell different stories. A business reporting $300,000 in SDE on a broker-prepared summary but showing $190,000 in taxable income on three years of returns is a $110,000 discrepancy that demands explanation. Hire a CPA to review financials independently, even if it costs $1,500–$3,000 — that fee has saved buyers from six-figure mistakes more times than it can be counted.

Do I need a business broker to buy a business, or can I find deals on my own?

You can find deals on your own through platforms like BizBuySell, LoopNet, or direct outreach to business owners — but working with a qualified broker gives you access to off-market listings, pre-vetted financials, and a structured process that protects both parties. Brokers are typically paid by the seller, so there's usually no direct cost to the buyer for representation in most small business transactions. That said, a buyer's broker or M&A advisor can add significant value in larger or more complex transactions by negotiating terms and managing the process on your behalf — their fee is typically 1–3% of transaction value and is often negotiated into the deal structure.

First-Time Business Buyer's Checklist | BuyThe.Biz

Buying a business for the first time is one of the most significant financial decisions you'll ever make. It's also one of the most misunderstood. Most first-time buyers come in assuming the process works like buying a house — you find something you like, make an offer, and move in 30 days later. The reality is more layered, more document-intensive, and far more rewarding when you do it right. This guide walks you through the real checklist — not a watered-down overview, but the specific steps, numbers, and decisions that determine whether your acquisition goes smoothly or sideways.

Step 1: Get Your Financial House in Order Before You Search

Before you look at a single listing, you need to know exactly what you're qualified to buy. Most business acquisitions are financed through SBA 7(a) loans, seller financing, or a combination of both. An SBA 7(a) loan typically requires a 10–20% down payment from the buyer, good personal credit (generally 680+), and relevant industry experience or management background. Lenders will scrutinize your personal financial statement, so have three years of personal tax returns, a current personal financial statement, and a resume ready to go before your first serious conversation with a lender.

If you're looking at a business priced at $400,000, expect to need $40,000–$80,000 in liquid capital just for the down payment, plus another 10–15% reserved for working capital post-close. Many first-time buyers underestimate working capital needs and find themselves cash-strapped in months three through six — a period when the business is still adjusting to the ownership transition.

Some states also require specific licensing before you can operate certain businesses. Florida, for example, requires separate licensing for businesses in healthcare, food service, childcare, and contracting. Texas and California have similar occupational licensing requirements that can delay your ability to operate by 30–90 days post-close if you haven't applied in advance. Know your state's requirements before you're under contract.

Step 2: Define What You're Actually Looking For

Buyers who search without a defined acquisition criteria spend 12–18 months looking at the wrong deals. Before you engage a broker or browse listings, answer these questions in writing:

Industry: What sectors match your background, interests, or transferable skills?
Geography: Are you buying locally, or open to relocation?
Revenue range: What annual revenue floor and ceiling are you targeting?
Owner involvement: Do you want an absentee-run business or one you'll operate actively?
Growth vs. stability: Are you buying for cash flow now or growth potential over five years?

A clearly written buyer profile makes it easier for brokers to surface relevant deals. Brokers with active listing inventories get multiple buyer inquiries daily — buyers who can articulate their criteria clearly get better attention and earlier access to off-market or pre-market opportunities.

Step 3: Understand Valuation Before You See a Listing Price

Business valuation is not arbitrary, but it does vary significantly by industry. Most small businesses are valued using a multiple of Seller's Discretionary Earnings (SDE) — essentially the owner's total economic benefit from the business, including salary, add-backs, and net profit. Here are typical multiples by industry category as a reference point:

Restaurants and food service: 1.5–3x SDE (higher for established brands with transferable revenue)
Retail businesses: 1.5–2.5x SDE (heavily affected by lease terms and e-commerce exposure)
Service businesses (B2B): 2.5–4x SDE (recurring revenue commands a premium)
Healthcare practices: 3–5x EBITDA, sometimes higher for specialty practices
Manufacturing and distribution: 3–5x EBITDA depending on equipment condition and customer concentration
Technology and SaaS businesses: 4–8x SDE or higher based on growth rate and churn

When you see a listing price, work backward: divide the asking price by the stated SDE and compare it to the range above. A restaurant asking $600,000 with an SDE of $120,000 is listed at 5x — well above market. That doesn't mean it's a bad deal, but it means you need a clear explanation for why the premium is justified. Conversely, a service business asking 2x SDE might be priced low due to customer concentration risk or owner health issues — both of which require investigation.

Step 4: Work With the Right Professionals From Day One

You will need three core professionals during a business acquisition: a business broker (or M&A advisor), a CPA with transaction experience, and a business attorney licensed in the state where the business operates. Do not use your personal tax accountant who has never reviewed a business purchase or a real estate attorney who is "willing to figure it out." The cost difference between a qualified transaction professional and a generalist is typically $1,500–$5,000. The mistake cost can be $50,000 or more.

Your attorney will review or draft the Asset Purchase Agreement (or Stock Purchase Agreement), negotiate representations and warranties, and advise on deal structure. Your CPA will analyze the tax implications of buying assets vs. stock — a decision that can affect your after-tax economics by tens of thousands of dollars in year one alone. In most small business transactions under $2 million, buyers prefer an asset purchase for tax and liability reasons. Sellers often prefer stock sales. Understanding why before you negotiate gives you leverage at the table.

Step 5: The Due Diligence Checklist — What to Actually Request

Once you're under a Letter of Intent (LOI) and in the due diligence phase, you'll have a defined window — typically 30–60 days — to verify every material claim made in the listing. This is not the time to be polite or assume. Request the following at minimum:

Three years of federal business tax returns (not just P&L statements)
Three years of monthly bank statements (to verify reported revenue against actual deposits)
Current lease agreement and landlord estoppel, including options to renew
Complete employee list with titles, compensation, tenure, and any non-compete or non-solicitation agreements
All vendor and supplier contracts, with assignability confirmed
Customer concentration analysis — if one customer represents more than 20% of revenue, that's material risk
Any pending or threatened litigation, regulatory complaints, or insurance claims
Equipment list with age, condition, and maintenance records
Inventory count and valuation methodology
Copies of all licenses and permits, with transferability confirmed

Many deals that fall apart do so during due diligence — and that's appropriate. The purpose of due diligence is not to kill the deal but to confirm the deal is what it was represented to be, or to renegotiate if it isn't. If the tax returns show $180,000 in revenue but the seller's P&L shows $260,000, that $80,000 gap needs a complete explanation before you proceed. "Cash sales" that were never reported are a liability you're inheriting, not a bonus.

Step 6: Negotiating Price, Terms, and the Transition Period

The purchase price is only one negotiating variable. In many deals, the terms matter more than the number. Seller financing — where the seller carries a portion of the purchase price, typically 10–30%, at 6–8% interest over 3–7 years — is a positive signal: it means the seller believes in the business's continued performance. It also gives you recourse if undisclosed liabilities surface post-close.

Negotiate a meaningful transition period. For businesses under $1 million in value, 30–90 days of seller training and introductions is standard and should be included in the purchase price. For businesses between $1–5 million, a formal consulting agreement of 3–6 months with defined deliverables is worth structuring separately. The relationships the seller has with key customers, vendors, and employees are often the most valuable thing you're buying — and they don't transfer automatically.

Non-compete agreements are standard in business sales and are generally enforceable when they're reasonable in scope, geography, and duration. A typical non-compete covers 2–3 years and a defined geographic radius or industry scope. Some states, notably California, have significant restrictions on non-compete enforceability — another reason your attorney needs to be licensed and experienced in the specific state where the business operates.

Step 7: Closing and the First 90 Days

Closing day is not the finish line — it's the starting line. The first 90 days post-acquisition are when most first-time buyers either build momentum or start losing it. Prioritize these actions immediately:

Introduce yourself to every key employee personally within week one
Contact the top 10–20% of customers (by revenue) directly within the first two weeks
Establish your own banking relationships and merchant accounts before close
Review all recurring expenses and subscriptions — most businesses carry 15–25% in unnecessary overhead
Set a 30/60/90-day operational review with defined KPIs before you change anything

Resist the impulse to make major changes in the first 60 days. Understand the business first. Many first-time buyers hurt revenue in months two and three by restructuring things they didn't fully understand yet. Stability signals to employees and customers that the transition is smooth — and smooth transitions protect revenue.

If you're looking to buy a business in Florida, Barrett Henry handles Florida transactions directly. For buyers in other states, Barrett's nationwide broker referral network connects you with experienced, vetted business brokers in your market who can surface legitimate opportunities and guide you through a clean transaction.

First-Time Business Buyer's Checklist: What You Need to Know Before You Sign