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SBA 7(a) loan

An SBA 7(a) loan is a US business loan made by an approved lender and partly guaranteed by the US Small Business Administration. It applies only in the United States and is widely used to buy small businesses.

Also called SBA 7(a), SBA loan

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Definition

An SBA 7(a) loan is a business loan available only in the United States, made by a bank or other approved lender under the Small Business Administration's 7(a) programme, with the SBA guaranteeing part of it to lower the lender's risk. Buying all or part of an existing business, which the SBA calls a change of ownership, is a permitted use, and the maximum 7(a) loan is $5 million. Detailed rules on buyer equity, seller notes and eligibility sit in the SBA's standard operating procedure for lenders (SOP 50 10), revised with effect from 1 October 2026.

Seller finance

Seller finance is when the seller lends the buyer part of the purchase price, to be repaid with interest after completion. It is also called vendor finance or a seller note.

Worked example

Maplestone Heating and Plumbing is a fictional US business priced at $2,000,000.

  • The buyer puts in $300,000 of their own money.
  • The seller agrees a $200,000 note, on terms the lender accepts.
  • An SBA lender provides a 7(a) loan of $1,500,000.

In this example, repayments on the loan come to about $240,000 a year. Earnings after a market salary for the owner's role are $360,000, so debt service coverage on the loan is 1.5 times. If the seller note is also being repaid, those payments count too.

Debt service coverage

Debt service coverage compares the cash a business generates with the loan repayments it must make. Lenders use it to judge whether an acquisition can carry its debt.

Why buyers care

For US buyers of smaller businesses, the guarantee can mean longer repayment terms and a smaller deposit than a conventional bank loan would allow. In return, expect personal guarantees, close scrutiny of tax returns and accounts, often an independent valuation of the business, limits on how seller finance is structured and a longer timetable.

The rules change from time to time, so confirm current requirements with an SBA lender before you make an offer that depends on one. The affordability check in Loupe's valuation tool lets you test repayments against earnings, but only a lender decides what it will lend. See also buying a business in the United States.

Sources

  1. 7(a) loans (opens in a new tab). U.S. Small Business Administration, 16 September 2026.
  2. Issuance of SOP 50 10 8.1 (opens in a new tab). U.S. Small Business Administration, 14 August 2026.
  • Senior debt

    Senior debt is borrowing that ranks first for repayment and is usually secured on the business's assets. It is typically the cheapest part of acquisition finance and carries the strictest conditions.

  • Seller finance

    Seller finance is when the seller lends the buyer part of the purchase price, to be repaid with interest after completion. It is also called vendor finance or a seller note.

  • Debt service coverage

    Debt service coverage compares the cash a business generates with the loan repayments it must make. Lenders use it to judge whether an acquisition can carry its debt.

  • Earn-out

    An earn-out is part of the purchase price paid only if the business meets agreed targets after the sale. It can bridge a gap between the seller's price and the buyer's view of the evidence.

  • Search fund

    A search fund is a way for an individual or pair of entrepreneurs to raise money, find one business to buy and then run it as chief executive.

  • Financing an acquisition: deposits, lenders, seller finance and earn-outs

    Most business purchases combine the buyer's own money with a loan and often some deferred payment to the seller. This guide explains each layer, outlines government-backed lending by country and shows how lenders test whether a deal can carry its debt.

    11 minutes to read
  • How small businesses are valued

    Most small businesses are valued as a multiple of their earnings. This guide explains how the earnings basis is chosen, why size and quality move the multiple, and why an asking price is not a sale price.

    11 minutes to read
  • Refusal of any seller finance or earn-out

    The seller wants the whole price in cash at completion and will not defer any part of it. That can be a reasonable preference, but it can also mean the seller does not expect the business to keep performing.

    Severity: price it inSeller and process
  • Tax returns that do not match the accounts

    When the profit in the tax returns cannot be reconciled to the profit in the accounts, you cannot tell which figures to trust, and there may be tax owed.

    Severity: deal breakerFinancials
  • See a low, likely and high value from the figures you have, and whether the asking price holds up.

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