Definition
An SBA 7(a) loan is a business loan available only in the United States, made by a bank or other approved lender under the Small Business Administration's 7(a) programme, with the SBA guaranteeing part of it to lower the lender's risk. Buying all or part of an existing business, which the SBA calls a change of ownership, is a permitted use, and the maximum 7(a) loan is $5 million. Detailed rules on buyer equity, seller notes and eligibility sit in the SBA's standard operating procedure for lenders (SOP 50 10), revised with effect from 1 October 2026.
Seller finance is when the seller lends the buyer part of the purchase price, to be repaid with interest after completion. It is also called vendor finance or a seller note.
Worked example
Maplestone Heating and Plumbing is a fictional US business priced at $2,000,000.
- The buyer puts in $300,000 of their own money.
- The seller agrees a $200,000 note, on terms the lender accepts.
- An SBA lender provides a 7(a) loan of $1,500,000.
In this example, repayments on the loan come to about $240,000 a year. Earnings after a market salary for the owner's role are $360,000, so debt service coverage on the loan is 1.5 times. If the seller note is also being repaid, those payments count too.
Debt service coverage compares the cash a business generates with the loan repayments it must make. Lenders use it to judge whether an acquisition can carry its debt.
Why buyers care
For US buyers of smaller businesses, the guarantee can mean longer repayment terms and a smaller deposit than a conventional bank loan would allow. In return, expect personal guarantees, close scrutiny of tax returns and accounts, often an independent valuation of the business, limits on how seller finance is structured and a longer timetable.
The rules change from time to time, so confirm current requirements with an SBA lender before you make an offer that depends on one. The affordability check in Loupe's valuation tool lets you test repayments against earnings, but only a lender decides what it will lend. See also buying a business in the United States.