What are the main sources of acquisition financing?

The 4 main sources are: (1) SBA 7(a) loans (up to 90% of purchase), (2) Seller financing (10-50% as a note), (3) Buyer equity injection (10-20% minimum), and (4) Earnouts (performance-based deferred payments).

Can I buy a business with no money down?

Yes, through creative financing. Combine seller financing (as your equity injection), investor capital, or ROBS 401(k) rollovers to minimize out-of-pocket costs. This requires a motivated seller willing to negotiate.

What is the most common financing structure for small business acquisitions?

The 80/10/10 structure: 80% SBA loan, 10% seller note (often on standby), and 10% buyer equity injection. This minimizes buyer capital requirements while satisfying lender conditions.

M&A Glossary

What is Acquisition Financing?

Definition

Acquisition financing is the combination of debt (SBA loans, bank loans), seller financing, and buyer equity used to fund the purchase of an existing business. Most small business acquisitions use multiple capital sources rather than a single funding method.

The 4 Main Sources of Acquisition Financing

Small business acquisitions typically combine several financing sources to minimize the buyer's out-of-pocket capital while satisfying lender requirements:

Source	Typical %	How It Works
SBA 7(a) Loan	70-90%	Government-backed bank loan with 10-25 year terms
Seller Financing	10-50%	Seller provides a loan (note) for portion of purchase
Buyer Injection	10-20%	Your equity: cash, investors, or ROBS 401(k)
Earnout	0-30%	Deferred payment based on post-sale performance

Common Financing Structures

The 80/10/10 (Most Common)

80% — SBA 7(a) loan from a bank
10% — Seller note (often on "full standby" for 2 years)
10% — Buyer equity injection

This structure minimizes buyer capital while satisfying SBA requirements.

The 70/20/10 (Higher Seller Involvement)

70% — SBA 7(a) loan
20% — Seller note (larger role)
10% — Buyer equity injection

Used when banks want more seller "skin in the game" or when the deal has risk factors.

The "No Money Down" Structure

80% — SBA 7(a) loan
10% — Seller note (counts as injection)
10% — Investor equity or ROBS 401(k)

Requires a highly motivated seller willing to provide a seller note that satisfies SBA injection requirements—plus investors or retirement funds for the remaining equity.

Why Motivated Sellers Enable Creative Financing

Creative financing structures require seller cooperation. A seller running a competitive auction with 50 bidders won't offer a standby seller note or earnout—they'll take the highest cash offer.

Retirement-ready owners (age 60+, 20+ year tenure, digital stagnation) are different. They prioritize:

Clean exit — Less concerned with extracting maximum price
Legacy preservation — Want the business to survive under new ownership
Patient timeline — Willing to wait 60-90 days for SBA closing
Tax deferral — Seller notes spread income over multiple years

This is why LegacyScout focuses on finding these sellers first—before they list with a broker and enter competitive dynamics.

Find Sellers Open to Creative Financing

LegacyScout identifies retirement-ready owners who will negotiate flexible terms.

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