How to Buy a Business

A step-by-step guide for first-time buyers. From discovery to closing, here's what the process looks like.

The Acquisition Roadmap

1

Discovery

Define your criteria, browse listings, and identify potential opportunities that match your goals.

  • Set your budget and financing expectations
  • Identify target industries and geographies
  • Browse and save listings that interest you
  • Research the industry and local market
2

Letter of Intent (LOI)

Make your first move. An LOI signals serious interest and begins the formal process.

  • Request financials and key details from the seller/broker
  • Perform preliminary due diligence (public info, site visit)
  • Draft and submit a Letter of Intent
  • Negotiate key terms: price, timeline, contingencies
3

Due Diligence

Verify everything. This is where you confirm the business is what it claims to be.

  • Review 3 years of tax returns and P&L statements
  • Verify customer concentration and contracts
  • Inspect equipment, inventory, and lease terms
  • Assess employee/contractor relationships
  • Hire a CPA for a Quality of Earnings (QofE) analysis
4

Financing

Secure your funding. SBA 7(a) loans are the most common path for first-time buyers.

  • Get pre-qualified with an SBA-preferred lender
  • Gather required documents (personal financials, business plan)
  • Submit formal loan application
  • Complete SBA appraisal and environmental review
  • Receive commitment letter and finalize terms
5

Close & Transition

Sign the papers, fund the deal, and begin the ownership transition.

  • Finalize Asset Purchase Agreement (APA) with attorney
  • Complete closing checklist (escrow, licenses, insurance)
  • Fund the deal and transfer ownership
  • Begin 30-90 day transition period with seller
  • Meet employees, customers, and key vendors

SBA Loan Primer

The Small Business Administration guarantees loans from approved lenders, making it easier to finance business acquisitions with as little as 10% down.

SBA 7(a) Loan

The most popular program. Up to $5M, 10-25 year terms, 10-20% down payment. Best for acquiring existing businesses.

SBA 504 Loan

Designed for real estate and major equipment. Lower rates but more restrictive. Good if the deal includes commercial property.

Typical Terms (2026)

10% down, Prime + 2.75% (roughly 10-11% total), 10-year term for business acquisitions. Monthly payments similar to a mortgage.

Your Professional Team

You don't need to do this alone. Here's who to have in your corner:

Business Attorney

Reviews APA, handles closing docs

CPA / Accountant

Quality of Earnings analysis, tax planning

SBA Lender

Financing, pre-qualification

Business Insurance Broker

Liability, property, key-person coverage

Key Terms Glossary

SDE (Seller's Discretionary Earnings)
Net income + owner salary + add-backs. The true cash flow to an owner-operator. The most common valuation basis for small businesses.
Multiple
The multiplier applied to SDE to determine business value. Typically 2-4x for small businesses, depending on industry and growth.
LOI (Letter of Intent)
A non-binding document outlining the proposed terms of an acquisition. Signals serious interest and kicks off due diligence.
APA (Asset Purchase Agreement)
The binding contract that transfers business assets from seller to buyer. Drafted by attorneys after due diligence.
QofE (Quality of Earnings)
A financial analysis performed by a CPA to verify that the business's reported earnings are accurate and sustainable.

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