Your key employees already know the ins and outs of your firm—the projects, clients, and culture that define your legacy. If you plan to sell business to key employees, updated SBA 7(a) loan rules effective in 2025 make that transition more feasible: buyers can now acquire the firm with just 10% down, tapping financing backed by a 75–85% SBA guarantee.
This structure allows you to receive near 100% cash payment at closing without carrying extended seller notes, using a financing package that combines SBA lending with a limited seller standby note and life insurance protections aligned with SOP 50 10 8.
Our proven 5 to 7 year Step-Up Legacy Plan™ aligns A/E firm valuation benchmarks, lender underwriting criteria, and legacy preservation—giving owners a practical path to retirement liquidity and employee ownership in a competitive market.
With just 10% down, your trusted employees can buy your firm and you get paid fully at closing.
Successfully transitioning ownership of an architecture, engineering, or land surveying firm requires disciplined multi-year planning, especially with the SBA's tightened underwriting rules effective June 2025. Here’s how owners and key employees can collaborate to sell business to key employees while achieving full seller payout at closing and leveraging SBA 7(a) acquisition financing with about 10% buyer equity.
Step 1: Leadership Identification and Financial Preparation (Years 1–2)
Start by selecting senior employees ready to grow into ownership roles. At the same time, clean and document your financials thoroughly: detailed reporting of project backlog, work-in-progress (WIP), client contracts, and recurring revenue like retainers. SBA lenders value financial transparency and stable cash flow, which builds trust and supports higher valuation multiples (generally 3–6 EBITDA for firms with $1M–$8M revenue).
Step 2: Client Contract Strengthening & Risk Mitigation (Years 2–3)
Formalize client contracts and retention guarantees to reduce perceived lender risk. Predictable revenue streams are critical for SBA approval and improve bank comfort with project-based firms. Under SOP 50 10 8, lenders require careful risk assessment, including debt-to-worth ratio considerations and buyer financial discipline.
Step 3: Engage SBA-Approved Lenders Early (Years 4–6)
Proactively collaborate with lenders experienced in A/E firm acquisitions. SBA’s updated policy allows up to 90% financing with a 10% down payment and an SBA guarantee typically between 75% and 85%, but also mandates stricter equity and citizenship criteria. Working with lenders who understand SBA loans for business purchase will streamline underwriting and documentation.
This approach maximizes your immediate retirement proceeds (often between 90%–100% cash at closing) while reducing exposure to the “parent loan” trap where sellers carry large financing risks for years.
Step 4: Valuation and Deal Structuring
Understand your firm’s valuation drivers—revenue consistency, EBITDA margins, client contracts, and reduced owner dependency build value. Engage specialized advisors who know project-based A/E revenue and SBA loan underwriting nuances to position your firm competitively. Designing earnouts or limited holdbacks can smooth transition risk without open-ended seller financing.
Step 5: Exit Execution (Years 5–7)
Coordinate final SBA loan approvals, documentation, and closing diligence with the buyer, lender, and counsel. The seller receives full or near-full cash at closing, with employees officially stepping into ownership roles under a bank-backed financing package optimized for legacy alignment and financial security.
This process aligns incentives, makes excellent use of SBA 7(a) programs under SOP 50 10 8, and positions your firm for a smooth succession free of seller financing headaches.
The Step-Up Legacy Plan™ uses SBA financing to deliver near 100% cash at closing—avoiding seller carrybacks and complex ESOP costs.
In 2025, SBA underwriting requires more robust documentation and financial discipline, but this should not deter owners from pursuing employee buyouts. The key is early and consistent preparation over 5 to 7 years, allowing lenders to verify stability and buyer readiness.
Key bank requirements include:
Avoiding the Parent Loan Trap: By structuring deals with limited seller standby notes, owners avoid extended exposure to debt risk and accelerate retirement access to cash.
The legacy benefits are substantial: trusted employees preserve client relationships and firm culture, internal continuity reduces risk of client loss, and owners exit with strong financial security.
Allen Business Advisors has guided numerous A/E firms successfully through this 5 to 7 year SBA-backed buyout timeline—maximizing firm value, meeting lender expectations, and structuring transactions that pay out near 100% seller cash at closing.
Whether you are an owner planning your succession roadmap or a key employee preparing to buy, understanding these bank and SBA mechanics is vital in 2025’s evolving financing environment.
Start early, prepare meticulously, and work with advisors who know the A/E/LS industry intricacies and SBA loan program details to secure your firm’s future and your retirement with confidence.
Your A/E/LS firm’s future is valuable, and your legacy deserves protection through a well-structured succession plan. With the Step-Up Legacy Plan™, you can exit on your terms, receive cash at closing, and empower your employees to lead.
Planning 5 to 7 years ahead maximizes your firm’s value and financing options, reducing risk and ensuring continuity. Reach out to Allen Business Advisors to explore how this proven strategy can work for your unique firm and situation.
Secure your legacy while unlocking full payment—your succession journey starts now.
