The biggest myth in buying a business is that you need the full price in cash. You usually don't. Most deals are a stack of a little of your money, a bank loan, and often the seller's help.
The SBA loan — the main tool (in plain English)
An SBA loan is just a regular bank loan for buying a business — but with the U.S. government standing behind it. "SBA" is the Small Business Administration, a government agency. It promises the bank that if you can't pay it back, the government covers most of the loss. Because the bank is protected, it's willing to say yes — and to let you put down far less of your own money than normal. That's the whole trick: the government's backing is what turns a "no" into a "yes."
What that means for you:
- As little as ~10% down in many cases
- Up to $5 million
- ~10-year repayment terms
- A personal guarantee — you're on the hook, so this is real
The key test: the business's cash flow (its SDE) has to comfortably cover the loan payments and leave you a living. Lenders check this carefully — which is also a useful sanity check on whether the price makes sense.
Seller financing — the buyer's best friend
Seller financing is when the seller lets you pay part of the price over time, instead of all at closing — like the seller acting as a mini-bank. A typical deal might have the seller "carry" 10–30% as a note you pay back over a few years.
Why it's powerful: it reduces the cash and bank loan you need, and it's a confidence signal. A seller willing to get paid over time clearly believes the business will keep making money. A seller who insists on 100% cash at closing and won't carry anything? Ask why.
A common deal "stack"
10% your cash down + 80% SBA loan + 10% seller note = 100% of the price. You control a business worth ten times your cash-in.
Where the down payment comes from
- Personal savings
- Retirement funds (there are legal structures to use these — talk to a specialist)
- Partners or investors who put in cash for a share
- Seller financing reducing how much you need up front
Before you fall in love with financing math, make sure the business is real. Next: the due-diligence checklist.