If you have searched for how to finance buying my employer's business, the answer is almost always an SBA 7(a) loan. It is the financing built specifically to help individuals buy the company they work for, and it can fund the purchase price, goodwill, working capital, and closing costs in a single package with as little as 5 percent down from you. Here is how the financing works from the employee buyer's seat.
One loan covers the whole deal
An SBA 7(a) acquisition loan is designed to buy an entire business at once. Rather than piecing together separate financing for the purchase price and the working capital you will need on day one, the 7(a) rolls it into one loan on a 10-year, fully amortizing term with no balloon payment. That keeps the monthly obligation predictable while you settle into ownership.
How the down payment actually works
The SBA requires a 10 percent equity injection on an acquisition loan. It does not require all of it to come from you. A seller note placed on standby can count for up to half, so the common structure is 5 percent from the buyer, 5 percent from the seller, and 90 percent from the bank. That is where the phrase as little as 5 percent down comes from, and it is the engine behind the Step-Up Legacy Plan.
What the loan limit means for you
The SBA loan limit is $5,000,000 per loan. For larger firms, our banking partners will frequently lend their own money on top of the SBA portion to reach $10,000,000 or more. When banks add their own funds, some of the equity injection rules can change, but the structure stays advantageous for a buyer.
What lenders want to see
The business is the borrower, and its income repays the loan. Lenders review three years of the firm's tax returns and focus on proven, historical cash flow rather than projections. They also look at you as the buyer through the five Cs of lending: character, capacity, capital, collateral, and conditions. Anyone who takes ownership must personally guarantee the loan.
Why sellers welcome it
An SBA-financed purchase pays the seller 95 to 100 percent of their proceeds in cash at closing. That is why owners so often prefer it to carrying a note themselves. The bank takes the repayment risk, not the seller, which makes your offer far more attractive than an installment sale.
Next steps
For the full mechanics of the program, see our guide to SBA financing to buy a business. When you are ready to find out whether the firm you work for is financeable, the first move is a confidential look at the numbers, before you approach the owner.