Personal Liquidity before an acquisition?

November 13, 2025

by a searcher from University of North Texas in Austin, TX, USA

I recently had an LOI on a business and as part of the process found that most banks wanted me to put 2-3% into the deal and also have a personal liquidity that covered 3-6 months of debt payment. So for a $3.5M loan, that would be 150-300k in personal liquidity after the purchase, and $100k for my portion of the down payment. I'd be using investors for everything else. Is this the norm? Do I need $250k minimum but more likely $400-500k in personal liquidity to be able to buy a $3-4M business? I know there are sunk costs in due diligence as well that come out of my funds, but just want to be sure my numbers are accurate here and understand what the norm is for SBA transactions of this size.

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Reply by a searcher
from American University of Paris in Cuxhaven, Germany

🧑🏻‍💻 I wrote a blog on this topic a while back... When acquiring a business, especially in the $3-4M range, you have several strong alternatives to traditional bank financing that can minimize your personal liquidity requirements: 1. Owner Financing • Negotiate with the seller to finance part or even the majority of the purchase price. • Typical structures might have the seller carry 20–50% of the sale in the form of a promissory note, often with below-market interest and flexible terms. • Seller financing can sometimes be structured as interest-only payments for a set period, ballooning at the end, which further preserves your liquidity. 2. Investor Capital (Equity or Debt) • Bring in outside money (OPM – Other People’s Money) via private investors, who can either: • Provide equity in exchange for a percentage of ownership/profits. • Structure as preferred debt with agreed-upon return. • Angel investors, family offices, or search funds are common sources. 3. Earn-Out Arrangements • Structure part of the purchase price as contingent on future earnings or milestones post-acquisition. • This reduces the upfront cash (and liquidity) needed. 4. Vendor/Supplier Financing • In some industries, suppliers might offer favorable terms or purchase order financing based on projected business. 5. Alternative Lending (Non-Bank) • Specialty lenders or private credit funds may have less rigid liquidity requirements than banks, especially if there’s strong collateral, recurring revenue, or SBIC/private credit involvement. Key Advantages • Much lower personal liquidity required. • Greater deal flexibility and negotiation power. • Less reliance on SBA or traditional banking requirements. Consider: • Most non-bank and owner-financed deals still expect you to have some financial ‘skin in the game,’ but these amounts can be much lower (~5–10% of purchase price or less, depending on deal structure and investor confidence). • Thoroughly document personal guarantees, repayment schedules, and contingencies in all OPM/owner-financed deal structures. If you’re adept at deal-making, these strategies can allow you to acquire significant businesses with minimal personal capital at risk. 😏💬 HMU on LinkedIn. Happy to chat over Zoom n coffee ☕️

Reply by a lender
from Cornell University in Los Angeles, CA, USA

Hi Anon - nice to meet you. This is a great question and one that comes up often at this deal size. What you are seeing is normal. For SBA lenders, post close liquidity is a requirement. A box lenders typically want around 5% of project cost in post close liquidity. For a deal in the three to four million dollar range, that usually translates to about $150k to 300k in personal liquidity after you inject your required equity. Remember that the equity injection is 10% of total project cost, which includes purchase price, guarantee fee, and closing costs. You can reduce your cash requirement by using a 5% cash and 5% seller note on full standby structure, but you still need to show post close liquidity based on the lender’s box. We have a lot experience financing buyers via the SBA. If you ever need help talking through a deal, I am happy to help. We work with all the major SBA lenders. The bank pays us after your loan closes, so this is a 100 percent free service for you. You can email me directly at redacted or schedule a meeting with me: https://cal.com/francodeguzman/30min. Look forward to chatting!

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