Acquisition financing and startup financing follow separate SBA eligibility paths, different valuation requirements, and different equity-injection rules. Acquisitions have an existing cash flow history to underwrite; startups must substitute owner equity, projections, and business plan quality instead.
Acquisition financing has the advantage of a verifiable operating history — tax returns, bank statements, and DSCR calculations give a lender real cash flow data. Startup financing has none of that. The lender must substitute owner equity contribution, personal credit, relevant industry experience, and business plan quality. This asymmetry drives every structural difference between the two loan types.
The SBA 7(a) program is one of the most common vehicles for business acquisitions under $5M. The SBA SOP 50 10 requires that for an acquisition, the lender must: (1) obtain and review a business valuation from a qualified source, (2) verify that the purchase price does not exceed the appraised value by more than a defined tolerance, and (3) confirm the seller is at arm's length from the buyer. The SBA's buying a business page documents eligible use cases and the equity injection requirement — typically 10% of the total project cost from the buyer's own funds.
SBA loans are available to startups, but the bar is higher. Without operating history, lenders require a detailed business plan with financial projections covering at least 3 years, evidence of owner equity injection (typically 10–20% of total project cost for startups vs 10% for acquisitions), and documented relevant industry experience from the ownership team. Startup SBA loans are also more likely to require collateral up to the loan amount — real estate or other hard assets — because there is no cash flow to back the DSCR calculation.
For acquisitions over $250,000, SBA SOP 50 10 requires an independent business valuation prepared by a qualified valuation professional. The valuation typically uses one of three methods: asset-based (sum of business assets minus liabilities), earnings-based (EBITDA multiple), or market-comparable (comparable recent sales). The SBA uses the valuation to ensure the lender isn't financing an inflated purchase price — overpaying relative to appraised value can trigger a partial guarantee limitation.
Many acquisition deals include a seller-financing component where the seller holds a note for a portion of the purchase price — commonly 5–30%. The SBA allows seller notes but requires them to be on full standby (no payments during the SBA loan repayment period) unless the DSCR supports concurrent payment. Seller financing on standby effectively reduces the equity injection requirement because the lender counts it toward the buyer's skin in the deal.
Acquisition: $500,000 purchase price. Business valuation required. Buyer equity injection: $50,000 (10%). Seller note on standby: $50,000. SBA 7(a) loan: $400,000. Underwriting based on: 3 years of business tax returns + seller bank statements. Startup: $500,000 total project. No valuation required. Owner equity injection: $75,000–$100,000 (15–20%). SBA 7(a) loan: $400,000–$425,000. Underwriting based on: owner FICO 680+, 3-year financial projections, business plan, relevant industry experience.