2026 UPDATE:
The New $10 Million Acquisition Era
Effective July 4, 2026, a landmark SBA rule change is set to double the purchasing power for mid-market business acquisitions. By “decoupling” the 7(a) and 504 loan programs, the SBA now allows a single borrower to access a cumulative $10 million in total funding—effectively stacking a $5 million 7(a) loan for the business purchase with a separate $5 million 504 loan for the commercial real estate.
$10 Million Total (Decoupled) SBA Loan Limit As of July 4, 2026:
- $5 Million 7(a) Loan: For the acquisition of goodwill, inventory, and working capital.
- $5 Million 504 Loan: For the acquisition of real estate and heavy machinery.
- The Result: A cumulative $10 million financing stack that allows entrepreneurs to acquire mid-market manufacturing plants and logistics hubs with as little as 10% down.
Technical Tip:
To maximize the $10M capacity, the 7(a) loan must be approved first.
This sequencing ensures the 504 loan is viewed as a separate project limit.
To incentivize the reshoring of industry, the SBA has launched the Made in America Loan Guarantee for manufacturing businesses.
- Increased Security for Lenders: For manufacturers in NAICS Sectors 31–33, the SBA now provides a 90% federal guarantee on 7(a) loans (up from the standard 75%).
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- NAICS Sector 31 Non-Durable Goods – Light Manufacturing
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- NAICS Sector 32 Process-Based & Intermediate Goods
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- NAICS Sector 33 Durable Goods Manufacturing
- Easier Approvals: This higher guarantee significantly reduces the risk for banks, making it much easier for buyers to get approved for “asset-light” acquisitions or businesses with thinner margins.
- Broader Reach: This 90% guarantee now extends beyond traditional factories to encompass the entire food supply chain, from agriculture and production to logistics.
The minimum down payment for SBA loans is 10%, The down payment must be cash from the buyers personal accounts and cannot be borrowed.
There are exceptions where the seller can carry a seller note to reduce the buyer’s down payment. If the buyer down payment is less than 10%, the seller note must make up the difference and the seller note must be on standby for the full term of the SBA loan, 120 months.
Standby means no payments are made on the note during the standby period. The note may earn interest during the standby period.
The SOP (Standard Operating Procedure) 50 10 8 has been revised effective March 1st, 2026 and now requires all direct and indirect owners of small business applicants for SBA loans must be US Citizens and have their principal residence in the United States.
Legal Permanent Residents (LPRs) are now longer allowed to have any ownership in companies seeking SBA financing and no foreign ownership is permitted.
The maximum interest rate permitted by SBA regulations is Prime Rate + 3.0%.
This may be a variable rate or a fixed rate loan and this is up to the lender. Most lenders consolidate and sell their loans on the secondary market and thereby only offer variable rate loans. Some larger banks hold their loans in their portfolio and can offer very competitive fixed rates, however, their underwriting criteria is often more conservative.
The SBA lending market is competitive enough where few SBA 7a lenders charge the maximum rate. Many change Prime + 2.5% to Prime + 2.75%, and for transactions with excellent financials from the business and the buyer more competitive rates are often offered.
Rates also vary by industry based on historical default rates in that particular market.
SBA lenders require financial statements for the buyer and the business to be acquired.
For the Buyer:
- Personal Financial Statement
- SBA Loan Application form (from the lender)
- Last 3 years tax returns (personal)
- W2s
For the Business:
- Last 3 years federal tax returns
- Last 3 years P&Ls and balance sheets
- Year to Date P&L and current balance sheet
- A/R (accounts receivable summary)
Additional financial statements may be required once the deal is in underwriting.
Recently revised SBA guidance now requires the buyer to have the professional license(s) necessary to operate the business prior to closing.
The SBA does not allow the Seller or a third party to act as the licensee for the business. The licenses must be held by the buyer or a partner with equity in the business and listed on the purchase agreement.
The SBA will allow the seller to act as the licensee, if the seller retains or has equity in the business and provides a personal guarantee for the buyer’s SBA loan.
SBA lenders generally require collateral and SBA regulations require lenders to take collateral if it is available.
Some SBA lenders do not require collateral on smaller loan values. This varies with each bank based on their credit policies.
SBA lenders prefer real estate for collateral and most SBA loans are collateralized with the borrowers personal residence.
The business and it’s equipment is not sufficient collateral for any SBA loan and additional collateral will be required.
All SBA 7a business acquisition loans require a third party business valuation (appraisal). If the lender is taking collateral such as real estate this will require an appraisal as well.
Appraisals are ordered after the buyer signs the LOI or CCL and sends their deposit to cover the appraisal fees.
SBA loans require a personal guarantee from the borrower(s).
Co-borrowers with less than 20% equity are not required to provide a personal guarantee.
Most SBA lenders prefer credit scores over 700. Some SBA lenders will accept credit scores as low as 680 for smaller transactions.
SBA 7a business acquisition loans have a 120 month term (10 years) and are fully amortized over the 120 month term.
SBA loans for real estate are amortized over 25 years.
Previously, acquisitions for a business and the real estate were blended for a combined amortization. The business loan and the real estate loan are now split with the business amortized for 10 years and the real estate for 25 years.
SBA loans amortized for less than 15 years have no prepayment penalty.
After year 3 there is no prepayment penalty regardless of the loan term.
The SBA is NOT a lender, it provides loan guarantees to banks offering small business loans meeting the SBA loan program criteria.
The purpose of the SBA is to help Americans start, grow, and build businesses by providing access to capital. The SBA loan guarantee reduces the lending risk for SBA lenders.
The SBA guarantees up to 85% of loans less than $150,000 and 75% of loans over $150,000 and up to $5 million.
The SBA guarantee fee is paid by the borrower (buyer) and goes directly to the SBA (not the lender). The SBA loan guarantee fee structure is:
2% of the loan value for under $150,000
3% of the loan value for $150,001 to $700,000 loan value
3.5% of the loan value for over $700,000
$3.75% for the loan value portion over $1 million and up to $5 million
The SBA issued new rules in 2026 requires all borrowers on SBA loans to be US citizens.
Legal Permanent Residents (LPRs) and non-US Citizens are no longer allowed to obtain SBA loans and are not allowed to not hold any equity in the business being financed by an SBA lender.
After you have submitted your SBA loan application along with the necessary business financials and information, your SBA lender will send either an LOI (Letter of Intent) or CCL (Conditional Commitment Letter) as a preapproval for your loan.
A SBA lender LOI is usually be from the BDO (Business Development Officer) and may or may not have been reviewed by underwriting and the credit officer.
A CCL has usually been reviewed by underwriting and the Credit Officer who is the final signing authority.
Both LOIs and CCLs are excellent indicators that your loan will likely get final approval.
Term sheets are used by some lenders and some SBA loan brokers. Term sheets are not necessarily an indication that the transaction have been reviewed and has a pre-approval from underwriting or the Credit Officer. Term sheets are generally considered less reliable than a formal LOI and much less than a CCL.
After you receive your LOI or CCL and return the signed agreement with the required deposit underwriting starts.
After underwriting is complete the credit officer reviews the loan package and approves the loan.
Final approval is sent after credit approval.
SBA PLP (Preferred Lender Program) banks are a select group of banks the SBA has qualified for this program. PLP lenders are authorized to approve their own loans and pull a SBA loan number without obtaining SBA approval.
Non PLP lenders must submit their loan packages to the SBA for approval through the General Processing (GP) portal which delays loan approval by 30 to 45 days.
Experience in the business and industry of the business being acquired is an important part of qualifying for an SBA loan and underwriting approval.
SBA lenders see direct and hands on experience as critical to the buyer’s ability to successfully operate the business and thus reduces risk.