Funding an Acquisition: How did you approach the down payment?

searcher profile

February 28, 2025

by a searcher from Indiana University (System) in Carmel, IN, USA

For those who have acquired a business using an SBA loan, how did you approach funding the down payment? Did you use personal funds, bring in outside investors, or find other creative financing solutions? Looking back, would you make the same decision again? Any lessons learned would be greatly appreciated as I am looking at acquiring a business in the near term.

Thanks,

Trent
0
21
185
Replies
21
commentor profile
Reply by an intermediary
from Indiana University at Bloomington in Carmel, IN, USA
Having helped over 100 business buyers buy a business using the 7A program, if you have the cash, invest in yourself and don't bring investors/partners in. The only reason to bring any partner into your firm is for their cash and for expertise that you need. While it is good to not use all of your $ for the downpayment so that you can have some in reserve, an investor (maybe not family/friends (very close) will want a much higher rate of return than what you would get putting it into the markets (most years). Several clients have used the ROBS program so that they could keep cash for liquidity as well. Happy to discuss with a Fellow IU Hoosier! redacted
commentor profile
Reply by a lender
from University of Michigan in Indianapolis, IN, USA
Reality check: Most of top SBA lenders in the ETA space aren't going to be excited about a deal with 100% OPM. (Other peoples money). Also, dont lose sight of overall leverage. Seller debt is still debt so 90% financing from the bank, and 5% on a seller note (for example) is still 95% leverage....and that's not a strong foundation to start your business on. We will be seeing updates from the SBA in the very near term that will require meaningful levels of true equity on biz acqs.
commentor profile
+19 more replies.
Join the discussion