Key Takeaways
- Most buyers acquire main street businesses with cash, SBA guaranteed loans, seller financing, or some combination of the three.
- Cash offers close fastest but require significant liquidity.
- Seller financing helps bridge the gap for buyers and often builds trust.
- SBA loans remain the most popular option for qualified, hands-on owners.
- A business broker can discuss the merits and reality of the options, connect buyers with lenders, coordinate the process, and keep the deal on track.
Buying an existing small business can be one of the fastest paths to entrepreneurship. For many buyers, the first question is what to buy—but an equally important one is how to pay for it. Whether your funding comes from personal cash, seller financing, an SBA-backed loan, or a combination, the right structure can make the difference between a deal that closes and one that stalls.
Entrepreneurship Through Acquisition
Entrepreneurship through acquisition (ETA) means buying an established small business instead of starting from scratch. This is often the preferred path for serial and new entrepreneurs who want independence with less risk than launching a startup.
The International Business Brokers Association (IBBA) reports that most main street businesses sold in the United States have annual revenues between $500,000 and $5 million. With nearly eight in ten owners already considering a sale, opportunities for buyers continue to grow. So how does someone actually go about buying one?
Cash Purchases
How Cash Purchases Work
Cash is the simplest and fastest way to buy a business. The buyer uses their own capital to pay the full price at closing, avoiding financing contingencies or lender approvals. While this option eliminates red tape, it is most common for smaller transactions, typically under $500,000. “In one recent Idaho retail transaction, both parties agreed to an all-cash sale,” says Seth Ruhter, an experienced finance professor and business intermediary based in Boise. “The buyer was a seasoned local entrepreneur with liquidity and a plan to take the business to the next level. All-cash makes deals happen.”
When Cash Makes Sense
Cash purchases are often seen in industries such as retail, e-commerce, and small service companies, where inventory is manageable and no real estate is involved. Buyers gain negotiating power and speed, but should also be mindful that additional cash (or access to capital) may be necessary for working capital after closing.
Even in an all-cash purchase, having a broker involved adds value. An experienced business broker helps buyers uncover the right opportunities, understand what they’re really purchasing, and navigate a process that can be more complex than it appears.
Seller Financing
What Is Seller Financing?
Seller financing allows a buyer to purchase a business by paying the seller over time instead of securing the full amount up front. These arrangements typically include a negotiated down payment, often around 50% or less, that provides the seller with confidence in the buyer’s commitment. The remaining balance is secured by the buyer’s collateral, which needs to be sufficient enough to support the loan.
Rates for this option commonly range from 6% to 10%. While the typical payoff timeframe for a seller-financed loan is 3 to 5 years, payments can be amortized (calculated) up to 10 years to keep monthly payments manageable.
In some situations, a smaller seller-carry portion, usually 5% to 15%, can be combined with an SBA guaranteed loan. When used this way, the seller note is typically subordinate to the bank’s collateral position and repayment priority.
This structure is sometimes used in transactions between $500,000 and $2 million. According to IBBA Market Pulse data, about 60% of Main Street business sales include some level of seller financing.
Why It Works
Seller financing gives buyers more flexibility, increases the number of qualified prospects, and shows that the seller believes in the business’s future performance. It can also make lenders more comfortable funding the remaining balance.
“When both sides are motivated and transparent, deals move more smoothly,” says Ruhter. “Seller financing builds trust by showing the seller’s confidence in what they’ve built and the buyer’s commitment to carry it forward.”
Brokers are often the bridge that makes seller financing possible. They help structure market terms, manage expectations, and clarify both parties’ obligations. While brokers can advise on structure and terms, it is still recommended that each party consult with their attorney and accountant to document repayment terms correctly.
SBA 7(a) & 504 Loans
Why SBA Loans Are the Most Common Option
The SBA 7(a) loan program remains the backbone of main street business financing. These loans can cover up to 90 percent of the purchase price for qualified buyers and offer terms of up to 10 years for goodwill or 25 years if real estate is included on a hybrid SBA 504 loan. Interest rates are variable and generally set to the Prime interest rate plus about 2% to 3% percent.
What Lenders Look For
According to Zach Balmer, Vice President and Senior SBA Business Development Officer at Lexicon Bank, lenders evaluate both financial and experiential readiness. “Experience—preferably direct industry experience or at least transferrable experience—is critical,” says Balmer. “A buyer’s balance sheet also matters. It shows lenders they can weather early challenges when they arise.”
Balmer emphasizes that the financing approval process and transaction closing occur more quickly when buyers are pre-qualified for financing before making an offer. “Having the financing structure dialed in from the start helps everyone. It gives the lender confidence, keeps the deal on track, and reassures the seller that the transaction will reach the finish line.”
Common Delays and How to Avoid Them
Balmer explains that most delays happen when lenders do not receive complete information on time. Missing documents, undisclosed credit issues, or unexpected risks force lenders to pause and reassess. Buyers who present a clear business rationale, relevant experience, and a strong personal balance sheet are far more attractive to lenders because they demonstrate preparedness and the ability to manage future challenges. Transparency and preparation are essential to avoid unnecessary setbacks and move toward a confident closing.
Brokers who have experience in SBA transactions maintain relationships with preferred lenders who understand business acquisitions. They can guide buyers through the required documentation, such as tax returns, profit-and-loss statements, and business summaries.
While brokers can help keep the financing process on track by coordinating with the seller’s accountant and the bank during underwriting, it’s important to note that the buyer remains the lender’s client. A broker can guide, advise, and help anticipate lender requirements, but they are not a direct intermediary. Communication about personal financial information, credit documentation, and loan updates occurs strictly between the buyer and the lender.
Choosing the Right Financing Path
The best financing method depends on business size, industry, and buyer readiness.
General Guidelines:
- Businesses under $500,000 more often sell for cash or with limited seller financing, but keep in mind that transactions of any size can potentially qualify for bank/SBA financing.
- Deals between $500,000 and $2 million could involve a combination of SBA and seller financing.
- Larger Main Street businesses between $2 million and $5 million often require more equity from the buyer or a mix of SBA and conventional lending.
Purchase structure often dictates how quickly a business sale closes and how smooth the process feels for both parties. Buyers who understand their options—cash, seller financing, and SBA loans—can approach opportunities with confidence.
Working with an experienced broker and a responsive lender makes that process even smoother. Brokers are not a substitute for a bank, but they are an essential part of the team that helps keep deals organized, compliant, and on track from offer to close.
Thinking About Owning a Business?
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