Expansion acquisitions

One of the most powerful and often misunderstood uses of SBA 7(a) financing is the expansion acquisition. At its core, an expansion acquisition allows an existing operating business to acquire another business as a natural extension of what it already does. This isn’t a new operator taking on unfamiliar risk. It’s a proven management team scaling a model they already know how to run. Historically, the SBA has distinguished expansion acquisitions from “new businesses” based on a few core factors: - identical ownership - the same six-digit NAICS code - operational integration through a co-borrower structure But in practice, geography often complicated things. Many lenders treated expansions as eligible only if the acquired business was located within a “reasonable” distance of the existing operation. That interpretation created friction, especially for operators looking to expand across state lines or into adjacent regions. That friction has now been meaningfully reduced. A recent SBA Procedural Notice updating SOP###-###-#### removed the geographic limitation from the definition used to distinguish a business expansion from a new business. In plain terms, location alone no longer determines whether a transaction qualifies as an expansion. Under the revised framework, when an existing business acquires another business with - the same six-digit NAICS code - identical ownership - a co-borrower structure The transaction can be treated as a business expansion, even if the new location is outside the original geographic footprint. This distinction matters. Expansion acquisitions are generally viewed as lower risk than true new businesses. They benefit from established management, proven operations, and systems that can be replicated. As a result, they often avoid the additional equity requirements and heightened scrutiny that apply to new business transactions. For operators pursuing growth through acquisition, this update meaningfully expands what’s possible with SBA financing. If you’re interested in having a conversation about expansion acquisitions and how SBA financing can support that strategy, please reach out to me at redacted