Do I need a business plan to buy a business with an SBA loan?

Appendix 15 of SOP 50 10 8.1 does not name a business plan among its change of ownership requirements, but the lender’s credit memo has to cover your industry experience, who runs the business day to day, the valuation behind the price and repayment from cash flow. A plan is the one document that answers all of those in your own words, and an individual lender can ask for one.

Can I use projections to qualify for an SBA acquisition loan?

No, not to meet the coverage test: under SOP 50 10 8.1, effective 1 October 2026, the lender must evaluate your post-closing projections but may not rely on them to meet debt service coverage on a change of ownership. Coverage is measured on the business’s last fiscal year, or the average of its last two. The one exception is an owner-occupied special purpose property, such as a hotel or self-storage site, fully secured by its appraised value.

What debt service coverage does the SBA require to buy a business?

Under SOP 50 10 8.1, Appendix 15, the minimum is 1.25 for an initial acquisition, 1.15 for a business expansion, 1.25 for an owner buyout and 1.25 for an ESOP or cooperative. The ratio is EBITDA divided by all debt service after the purchase, including any seller note that is not on full standby.

How much down payment do I need to buy a business with an SBA loan?

The SBA minimum equity injection for an initial acquisition is 10% of total project costs, and it cannot be reduced or waived. Seller debt on full standby can count, but standby and other limited sources may make up no more than half of the required injection, and 10% is the SBA minimum, not a ceiling.

Can the seller stay on after I buy the business?

In an initial acquisition or business expansion, the seller cannot remain as an officer, director, stockholder or employee, but the business may contract with them as a consultant for up to 24 months in total. In an owner buyout, where an existing owner or a 24-month employee buys in, the seller may stay on as an owner or employee.

Business plan for buying a business: what changes when it already trades

Q: Does the SBA allow an earnout when buying a business?

No: SOP 50 10 8.1 prohibits seller earnouts on 7(a) change of ownership loans. A buyer rebate tied to performance is allowed, and any rebate the buyer receives must be paid against the 7(a) loan principal.

BusinessPlanHub Editorial Team · Published 11 November 2026

A business plan for buying a business is an acquisition plan: it argues that a company with a trading record can carry new debt under a new owner. The lender tests it against the seller’s historic accounts first and your forecast second. Its core is the bridge from what the business earned to what it will earn under you.

For an SBA 7(a) loan, that order is written into the rules. Appendix 15 of SOP 50 10 8.1, published 25 September 2026 and effective 1 October 2026 (checked 9 October 2026), sets out how lenders underwrite a change of ownership. This guide covers what that means for the plan you write. The general underwriting tests (coverage, assumptions, equity, management) are in our guide to what SBA lenders look for in a business plan, and we will not repeat them here.

A start-up plan and an acquisition plan, section by section

A common mistake is to write an acquisition plan as a start-up plan with a purchase price added. Almost every section has a different job once the business already trades.

Section	A start-up plan says…	An acquisition plan says…
Financial plan	Here is what we forecast, and why the assumptions hold.	Here is what the business earned in each of the last three years, what we adjusted and why, and how the debt is covered on those numbers.
Projections	Coverage is reached within two years of funding.	Coverage is already met on history. The forecast shows what changes under new ownership, and it is read but not counted.
Funding request	What it costs to open, and where the money comes from.	The purchase price, what it buys (assets, goodwill, any real estate), the valuation behind it and how seller debt is structured.
Market analysis	There is demand, and here is our share of it.	The customers already exist. Who they are, how concentrated they are, and why they stay after the owner leaves.
Management team	We have the experience to build this.	We have the experience to run this one, and here is what we take over from the seller and when.
Operating plan	How the business will work.	How it works now, what we keep, what we change, and in what order.
Risks	Will customers come?	Will customers, staff, suppliers and the lease stay when the owner goes?

The shift is from proof of demand to proof of continuity. A lender financing a purchase is paying for an earnings record. Your plan has to show that the record is real and that it survives the handover.

Historic accounts carry the coverage test

Under Appendix 15, the lender’s repayment analysis rests on the acquired business’s three most recent year-end financial statements, at the highest level of reporting available: audited, then reviewed, then CPA-compiled, then tax returns. The lender also compares the latest interim statement with the same period a year earlier, and checks the seller’s figures against IRS tax transcripts.

Debt service coverage is then measured on the last fiscal year-end, or the average of the last two, on a historical or adjusted basis. The minimum depends on the type of deal:

Transaction type	Who it covers	Minimum coverage	Equity injection
Initial acquisition	A new majority or largest owner who did not own it before, or who has worked there under 24 months. The default category.	1.25	10% of project costs, cannot be reduced or waived
Business expansion	A business trading at least two full fiscal years under current ownership buys 100% of another in the same four-digit NAICS group.	1.15	10%, which the lender may reduce or waive
Owner buyout	Existing owners, or employees active in the business for the last 24 months, buy out an owner.	1.25	10% of the purchase price, which the lender may reduce or waive
ESOP or cooperative	An employee trust or cooperative buys 51% or more.	1.25	10%, not required for an ESOP buying a controlling interest

Source: SOP 50 10 8.1, Appendix 15, “Types of Changes of Ownership” and “Credit Standards” (Equity Requirements; Lender’s Credit Analysis). Coverage is EBITDA divided by combined debt service after the transaction.

Then the line that changes the plan: the lender “must evaluate the Applicant’s post-closing financial projections but may not rely on them” to meet coverage. You can still put in more equity to shrink the loan until history covers it. You cannot forecast your way past a thin year. The only carve-out is an owner-occupied special purpose property, such as a hotel or self-storage site, where the appraised real estate fully secures the loan; there, projections reaching the required coverage within two years can be used.

Add-backs are where your numbers meet the seller’s

Coverage on an “adjusted basis” means the seller’s earnings after add-backs: the owner’s discretionary spending, a salary above or below market, one-off income, distributions. Appendix 15 lets the lender make prudent adjustments but requires a written justification for each, and any adjustment without one is ineligible. If you change owner compensation, the lender must also show on a global cash flow that you can live on the new salary and meet 1.0 coverage across your personal obligations.

So the most useful page in an acquisition plan is a bridge. Start at the seller’s reported profit for each year, list every adjustment on its own line with the evidence behind it, and finish at the EBITDA you are asking the lender to underwrite. Put your own salary in as a cost. Then show coverage on that figure, with the new loan and any seller note that is not on full standby. The financial plan section of our template covers the assumptions page that sits beside it.

Which deal type you are changes the plan

Two of our fictional sample plans show why you should classify the deal before you write a word. Neither was written to these rules; the point is how the rules would read them.

The retail bicycle shop sample is a buyout by the shop’s assistant manager of five years, who is buying it from his boss. If the boss is the sole owner, Appendix 15 is clear: a single owner selling 100% to someone employed by the business for at least 24 months is an existing owner buyout, not an initial acquisition. Coverage is still 1.25, but no quality of earnings report is required, the lender may reduce the equity, and the seller may stay on as an employee. An outsider buying the same shop would face the initial acquisition rules instead.

The Italian restaurant sample buys the assets and leasehold improvements of an underperforming restaurant and converts it to a new concept. An asset purchase counts as a change of ownership when the buyer takes all or substantially all the assets and continues the seller’s operations. Where there is no clear continuity, the lender may evaluate it as a start-up, which brings back start-up rules on equity, terms and underwriting. A plan for that deal should say plainly which it is, and the sample’s year-one figures (projected revenue of $784,300 in a “rebuilding year”) read more like a start-up case than a continuity case.

Due diligence: what the lender will verify, and what you should already know

Appendix 15 treats financial due diligence as part of the primary underwriting, not a box after it. The lender has to do the following, and every item is something the plan should anticipate:

Tax transcripts. The seller’s reported figures are checked against IRS transcripts. Any gap between the books and the returns needs an explanation before the lender finds it.
A site visit to you and to the business being bought, or a documented alternative for an online business with no customer-facing site.
A quality of earnings report for an initial acquisition or business expansion with a business purchase price of $3 million or more. It must be independent and done for the lender, include a cash proof reconciling bank statements to the income statement and tax returns over the trailing 12 months and the last two fiscal years, and assess customer concentration, contract continuity and whether revenue and margins hold after the sale. The lender must use its earnings figure for coverage.
All purchase documents: the business, stock or asset purchase agreement with every schedule and amendment.
Global cash flow covering any affiliates, at 1.0 coverage, plus a pro-forma balance sheet, working capital adequacy for at least 12 months, and insurance: hazard and liability cover, plus life cover or a reason it is not needed.

If the quality of earnings report on a purchase of $3 million or more trims the seller’s earnings, the SOP says the loan amount is reduced to fit. You can put in more equity to bridge it. A plan built on the seller’s unadjusted figures will be rebuilt for you, at the worst possible moment.

The structure of the deal is checked too. Seller earnouts are prohibited, though a buyer rebate tied to performance is allowed and goes straight to the loan principal. Seller debt that is not on full standby is included in coverage, and if it is interest-only the lender applies an amortisation of no more than 10 years to test it. The change of ownership loan itself amortises over no more than 10 years unless real estate is part of the purchase.

Valuation: the price has to be supported by someone else’s number

Appendix 15 calls the business valuation “the key component” of a change of ownership application. The valuation must be requested by and prepared for the lender, by an accredited, independent valuer (ASA, CBA, ABV, CVA or BCA). The lender may not use one prepared for you or for the seller. Where the business purchase price, which excludes owner-occupied real estate, is $350,000 or less, the lender may value the business itself unless buyer and seller are closely related.

Three rules follow, and each shapes the funding request in your plan:

If you pay more than the valuation, the difference must be covered by equity.
Total debt for the purchase, including seller debt that is not on full standby, is capped at the valuation and must still pass the coverage test.
Seller debt on full standby, with no principal or interest paid for the life of the 7(a) loan, can count as equity, but standby and other limited sources may supply no more than half of the required injection.

You will not know the lender’s valuation when you write the plan. What you can do is show your own reasoning for the price: the earnings figure from your bridge, the multiple you applied, what is tangible and what is goodwill. If your price only works at the top of the range, the plan should say where the extra equity comes from if the valuation lands lower.

Write these down before you approach a lender:

the business purchase price, with any real estate shown separately;
adjusted EBITDA for each of the last two years, from your add-back bridge;
coverage on that EBITDA at the loan you need, against 1.25 or 1.15;
how much equity you have from unlimited sources, and how much rests on a seller standby note;
how much extra equity you could add if the valuation comes in under the price.

Transition: what happens when the seller leaves

The transition plan is the section start-up templates do not have, and it answers the question underneath every acquisition loan. Does the business keep earning once its owner walks out?

The rules set the outer limit. In an initial acquisition or business expansion, the seller cannot stay as an officer, director, stockholder or employee. If a handover is needed, the business may contract with the seller as a consultant for up to 24 months in total, including extensions. In an owner buyout, the seller may stay as an owner or employee, and a seller keeping under 20% must guarantee the loan for at least two years.

Within that limit, a credible transition section names specifics:

The handover timetable. Which relationships, suppliers and decisions move to you in month one, month three and month six, and when the consulting contract ends.
Customer concentration. What share of revenue the top five customers bring, and which of them have a personal tie to the seller. A quality of earnings report assesses exactly this.
Key staff. Who knows how the business runs, and what keeps them through the sale.
Contracts and licences. Leases, supplier terms and licences that need consent to transfer. Transferable licences conveyed in the sale, a liquor licence for example, are taken as collateral.
What you change, and when. Price rises, new systems and rebrands in year one are the changes most likely to break the earnings record you are borrowing against. Put them after the handover, and model them in the forecast rather than the coverage figure.

Your experience matters here more than in a start-up plan, because the lender has to describe your industry experience and who manages the business on site each day. The management team section of our template covers how to set that out.

Where to start

Ask the seller for three years of year-end accounts, the latest interim with last year’s comparable period, and the tax returns behind them. Build the add-back bridge first and test coverage at 1.25. If it fails on history, the fix is the price, the equity or the structure, not the forecast.

If the seller’s books do not reconcile, or you need the accounts rebuilt and a plan around them in time for the lender, that is usually where doing it yourself stops working. Our business plan for buying or selling a business is written to these tests, and a free 30-minute call will show you where your draft stands.