Business Acquisition Financing in Texas
Business acquisition financing covers loans used to purchase an existing business — not real estate, not equipment, but the operating company itself. The target business's cash flow, assets, and industry determine the loan structure. In Texas, the primary vehicles are SBA 7(a) loans, conventional bank term loans, and seller financing, often used in combination.
- Typical deal size: $150,000 to $5,000,000 for small business acquisitions
- SBA 7(a) maximum: $5,000,000 for business acquisitions
- Down payment: typically 10–25% of purchase price (equity injection)
- Collateral: business assets, sometimes supported by real estate
- Minimum time in business (target): typically 2+ years of operating history
Overview
Acquisition financing is structurally different from operating capital or equipment financing because the underwriting is split between two companies: the acquirer and the target. The lender evaluates the target business's historical cash flow (typically 3 years of tax returns and financials), its asset base, the purchase price relative to earnings, and the acquirer's ability to manage the business post-close.
The most common structure for small business acquisitions in Texas is the SBA 7(a) loan. SBA 7(a) loans can finance up to 90% of the purchase price of an eligible business, require a 10% equity injection from the buyer, and are available for most for-profit businesses. The SBA guarantee reduces lender risk, which is why SBA lenders can offer terms that conventional lenders cannot match on acquisition deals.
Conventional bank acquisition loans exist for larger transactions and for buyers who do not want to use SBA financing. They typically require 20–30% down and stronger financial profiles from both the acquirer and the target. They close faster than SBA deals and carry fewer use-of-proceeds restrictions.
Seller financing is a third component that often appears in Texas small business acquisitions — the seller carries a note for 10–30% of the purchase price. When seller financing is present alongside SBA financing, the SBA typically requires the seller note to be on standby (no principal or interest payments) for the first 24 months of the SBA loan.
Texas has a large population of privately owned businesses — particularly in energy services, construction, agriculture, and distribution — coming to market as owners reach retirement age. This creates ongoing acquisition activity and a corresponding market for acquisition lenders who understand Texas industries.
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Frequently Asked Questions
Can I use an SBA loan to buy a business in Texas?
Yes. SBA 7(a) loans are the most common vehicle for small business acquisitions. They allow buyers to finance up to 90% of the purchase price, with a 10% equity injection. The target business must be for-profit and meet SBA size standards.
What documentation does an acquisition lender require?
Typically: 3 years of the target's tax returns and financial statements, a purchase agreement or letter of intent, a business plan for the acquisition, 3 years of the buyer's personal tax returns, and a personal financial statement. Requirements vary by lender.
How long does acquisition financing take to close?
SBA acquisition loans take 60–120 days from application to close. Conventional bank deals run 45–90 days. Delays usually involve tax return verification, business valuation, and title/legal work on the target business.
What is an equity injection in acquisition financing?
An equity injection is the buyer's cash contribution to the deal — the down payment. SBA requires a minimum 10% injection. It must come from the buyer's own funds, not a loan, and must be verifiable before the SBA loan closes.
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Page last updated: August 2026