What Goes in a Business Acquisition Plan for an SBA Loan
SOP 50 10 8.1 never names the contents of a business acquisition plan: the phrase "business plan" does not appear once in Appendix 15, the 7(a) change of ownership appendix. Appendix 15 names what the lender's credit memorandum must address, so build the plan to that: the seller's three years of results, verified against IRS transcripts; justified add-backs; for an Initial Acquisition, 1.25:1 debt service coverage on history, not projections (except in buying an owner-occupied Special Purpose Property integral to the business whose appraised value fully collateralizes the loan, where the ratio must be met within two years of funding), and equity of 10 percent of total project cost; and any price above the lender's business valuation paid in equity.
General information, not lending, legal or accounting advice; we are not a lender, attorneys, CPAs or appraisers. This covers 7(a) change of ownership loans under Appendix 15 of SOP 50 10 8.1, effective 1 October 2026. Your lender may ask for more under its own credit policy. Confirm your file with that lender and the purchase agreement with your attorney.
Does the SBA require a business plan to buy a business?
No passage of SOP 50 10 8.1 requires a general business plan for a 7(a) change of ownership. The one plan it tells an applicant to submit is for an International Trade loan made to expand or develop export markets, where "the Applicant must submit an export business plan"; such a loan can fund a Business Expansion or an ESOP or cooperative transaction (Section B, Chapter 5). Its six uses of "business plan" are on our does the SBA require a business plan page. For most business loans, 13 CFR 120.191 lists "historical financial statements (or tax returns if appropriate) for the past three years, IRS tax verification, and a business plan, when applicable", without saying when a plan applies.
So, outside that export plan, no federal rule names the sections; any vendor's list is its author's outline. SBA's Plan your business page, general planning guidance rather than a lending rule, asks an established business for "income statements, balance sheets, and cash flow statements for the last three to five years" before five years of projections. The outline below is ours.
What does the lender have to document for a 7(a) change of ownership?
Under Lender's Credit Analysis, Appendix 15 says the credit memorandum "must address the Applicant’s ability and likelihood to repay the loan from the cash flow of the business and past performance by documenting the following".
| Plan section | What the lender must document | Appendix 15 paragraph, unless stated |
|---|---|---|
| 1. Transaction type | "Initial Acquisition is the default category for 7(a) changes of ownership." | Types of Changes of Ownership |
| 2. Business Purchase Price | The price "excludes all owner-occupied commercial real estate assets being acquired in the transaction" | Change of Ownership Requirements |
| 3. Business description | "A description of the business, its history, industry, and management structure." | Lender's Credit Analysis |
| 4. Buyer and management | The "Applicant’s industry experience and management team, including principal’s involvement in the daily onsite management of the business or how the daily operations will be managed if the principals are not there on a daily basis" | Lender's Credit Analysis |
| 5. Seller's three-year history | Three years on the "highest level of financial reporting available", plus current and prior-year interims | Financial analysis of repayment ability |
| 6. Transcript reconciliation | "the SBA Lender must verify the seller’s financial data" | Section A, Chapter 5 |
| 7. Add-back schedule | The "justification for each adjustment or add-back" goes in the credit memorandum | Adjusted Debt Service Coverage (DSC) |
| 8. Coverage schedule | "Initial Acquisition: 1.25:1", "Business Expansion: 1.15:1", on history | Financial analysis of repayment ability |
| 9. Sources and uses | "Initial Acquisition: 10%" of total project cost | Equity Requirements |
| 10. Equity-gap check | Price above the valuation: "the difference must be made up by equity" | Business Valuation Requirements |
| 11. Quality of Earnings | Initial Acquisition or Business Expansion at a price "equal to or greater than $3 million", measured before buyer equity and seller debt, except an owner-occupied Special Purpose Property acquisition | Quality of Earnings |
| 12. Seller's exit | Initial Acquisition or Business Expansion: the seller may stay only as a consultant "for a period not to exceed 24 months" | Change of Ownership Requirements |
| 13. Pro forma balance sheet and ratios | "Spread of pro-forma Business Balance Sheet" and ratio calculations | Lender's Credit Analysis |
| 14. Working capital | "Analysis of working capital adequacy, at a minimum, over the next 12 months" | Lender's Credit Analysis |
| 15. Projections | Evaluated, but the lender "may not rely on them to meet the DSC requirement" | Adjusted Debt Service Coverage (DSC) |
| 16. Risks and mitigants | Collateral adequacy, life insurance, competition, and "any liens, judgments, bankruptcy filings, or pending litigation, including divorce proceedings" | Lender's Credit Analysis |
Can you use projections to qualify for an SBA loan to buy a business?
No, except for an owner-occupied Special Purpose Property integral to the business whose appraised value fully collateralizes the loan, where the ratio must be met within two years of funding (our SBA loan to buy a business page). Appendix 15 tests coverage on history, the last fiscal year-end or the average of the last two, with the historical ratio EBITDA "divided by the combined debt service post-transaction" (ratios by transaction type: our SBA debt service coverage requirements page). Then:
The Lender must evaluate the Applicant’s post-closing financial projections but may not rely on them to meet the DSC requirement.
If history falls short, the Applicant "may contribute additional unlimited or limited equity to reduce the loan amount".
Worked example, figures assumed. An Initial Acquisition with no real estate, no other debt after closing and any seller note on full standby. EBITDA is $230,000 on the last fiscal year and on the two-year average, after any adjustment the lender accepts.
| Line | Amount | How it is reached |
|---|---|---|
| Price, also the Business Purchase Price | $1,200,000 | No real estate |
| Working capital and closing costs | $150,000 | Part of total project cost |
| Total project cost | $1,350,000 | 1,200,000 + 150,000 |
| Equity injection, 10 percent, not waivable | $135,000 | Limited sources at most half, $67,500 |
| 7(a) loan | $1,215,000 | 1,350,000 less 135,000 |
| EBITDA, both permitted measures | $230,000 | Assumed |
| Annual debt service at 10.5 percent over 10 years (an arithmetic input, not a rate quote) | $196,735 | $16,394.60 a month, times 12 |
| Historical DSC | 1.17 | 230,000 / 196,735, below 1.25 |
| Loan the business carries at 1.25 | About $1,136,350 | Debt service 230,000 / 1.25 = $184,000, same rate and term |
| Loan reduction needed | About $78,650 | 1,215,000 less 1,136,350 |
At 1.17 the test fails, whatever the projections show. The loan has to come down by about $78,650 before the ratio reaches 1.25, through more equity or a lower price. Paid in equity, the injection becomes $213,650.
How do you lay out the seller's financials so they reconcile to IRS transcripts?
Three fiscal years on the best statements that exist, each tied to the filed return. The lender verifies the seller's figures against transcripts (row 6), and Appendix 20, for a business purchase, says the seller's statements "must be dated and either signed or certified by the seller within 120 days prior to submission to SBA".
For each year, set the statement lines beside the return's and explain every difference. Then the add-backs:
Adjustments to cash flow without the Lender’s supporting analysis and justification will be ineligible for purposes of determining this core underwriting requirement.
Each add-back shows the amount, year, supporting document and why the cost does not continue under you.
What goes in sources and uses, and the equity section?
Total project cost against every source, with equity split into unlimited and limited sources. For an Initial Acquisition it is 10 percent of total project cost and "cannot be reduced or eliminated"; other transaction types, their bases and what counts as equity are on our SBA equity injection requirements page.
Limited sources "may provide no more than half of the required Equity Injection", and a seller note counts only if "subordinated to the Lender and on full standby"; otherwise it is debt and counts toward the cap below. Education, advisory services and Agent fees "are not eligible prepaid expenses and are not considered equity", so leave a plan writer's fee, ours included, out.
How does the plan show a gap between price and the lender's valuation?
As equity, with debt capped at the valuation. Appendix 15: "If the amount paid for the business exceeds the business valuation, the difference must be made up by equity." Total debt, "including seller debt that is not on full standby", is "limited to the business valuation amount", which, with no real estate in the deal, on our reading counts the whole 7(a) loan, working capital and closing costs included.
Outside ESOP loans, the valuation itself "must be requested by and prepared for the Lender", which "may not use a business valuation prepared for the Applicant or the seller" (who may prepare it: our SBA business valuation requirements guide).
Suppose the lender values the example business at $1,150,000. The $50,000 gap must be equity: the minimum injection is $135,000 if the gap counts toward it, or $185,000 if it sits on top. The SOP text we read does not say which, so confirm the treatment with your lender. Counting the whole loan toward the $1,150,000 cap also means equity of at least $200,000, total project cost less the cap. Coverage binds first: the loan is already down to about $1,136,350, under the cap, and equity of $213,650 clears all three figures.
Who can write a business acquisition plan, and what does it cost?
You can write it yourself: lenders and Agents must tell you that "the SBA does not require the use of an Agent for packaging or referring a loan application". Section A, Chapter 4 names "preparing a business plan" among the packaging services an Agent may charge for, and an Agent you employ may be paid as long as "compensation is reasonable and customary for those services; the compensation complies with SBA Loan Program Requirements; and the compensation is not contingent on the loan being approved or closed".
An Agent may charge "based on an hourly rate or on a percentage of the loan amount", and on an hourly rate the rate and "time spent on each service must be documented". SBA does not allow an Agent to charge "A standard or flat fee charged to all Applicants". When you pay an Agent, an SBA Form 159 must be "signed by the Applicant, the Agent, and the 7(a) Lender", and where one Agent's aggregate compensation exceeds $2,500, an itemization "must be attached to the Form 159".
Our fee is fixed in advance and payable whether or not the loan is approved. Before you engage us, ask your lender whether it treats our work on your plan as an Agent's packaging service on your loan, because if it does these fee and Form 159 rules apply to it.
Our Pricing Analysis is $1,250, a confidential information memorandum with blind teaser and data room index $2,800, and an acquisition business plan $1,800, or $2,800 with the acquisition model, all fixed. We never charge a percentage of anything you borrow, invest, raise or sell, and no part of our fee depends on a transaction completing. Every price we charge is on one page: /pricing. All our documents are on the exit and acquisition documents hub.
Business Plan Firm is the US practice of Avvale, a London consultancy. We have written 1,000+ plans for 500+ founders across 30+ countries, and our clients have raised $500M+.
How we verified this
Every quotation was checked against raw text retrieved on 30 October 2026.
- SBA SOP 50 10 8.1, effective 1 October 2026, the Word file on SBA's SOP 50 10 page: Appendices 15 and 20; Section A, Chapters 4 and 5; Section B, Chapter 5. The count of six is a case-insensitive search of the full text.
- 13 CFR 120.191, current text at the Legal Information Institute. No Federal Register rule has amended it since 1 January 2025.
- SBA, Plan your business (Write your business plan section), sba.gov, modified 29 October 2026.
Not verified, so not on this page: what any lender requires beyond the SOP; whether equity covering a price above the valuation sits inside or on top of the 10 percent minimum; what others charge to write a plan; underwriting times; approval rates.
Frequently asked questions
Does the SBA require a business plan to buy an existing business?
No passage of SOP 50 10 8.1 requires a general business plan for a 7(a) change of ownership: the phrase appears six times, never in Appendix 15. The one plan an applicant must submit is an export business plan for certain International Trade loans, which can fund a Business Expansion. 13 CFR 120.191 lists one when applicable. A lender may still ask for one.
What should a business acquisition plan include for an SBA 7(a) loan?
Build a business acquisition plan to the Appendix 15 list in SOP 50 10 8.1: transaction type and price, the business, your experience and daily management, the seller's three years tied to IRS transcripts, justified add-backs, historical coverage, sources and uses, the equity gap, the seller's exit, working capital, projections and risks.
What debt service coverage ratio does a business acquisition plan have to show?
Under Appendix 15 of SOP 50 10 8.1, an SBA 7(a) Initial Acquisition needs 1.25:1 and a Business Expansion 1.15:1, on the last fiscal year-end or the two-year average. The lender may not rely on projections to meet it, except for an owner-occupied Special Purpose Property integral to the business whose appraised value fully collateralizes the loan, where the ratio must be met within two years of funding.
How much equity do you need to buy a business with an SBA 7(a) loan?
For an Initial Acquisition, Appendix 15 of SOP 50 10 8.1 requires 10 percent of total project cost, which cannot be reduced or eliminated; limited sources, such as a seller note on full standby, may supply at most half. Any price above the lender's business valuation must be equity, inside or on top of that 10 percent; the SOP text we read does not say which, so ask your lender.
Do you need a consultant to write a business acquisition plan for an SBA loan?
No. SOP 50 10 8.1 requires 7(a) lenders and Agents to tell applicants that SBA does not require an Agent for packaging a loan application, and preparing a business plan is one of the packaging services it names. You can write a business acquisition plan yourself, built to the Appendix 15 list of what the lender must document.
General information from the sources above as retrieved on 30 October 2026, not lending, legal, tax or accounting advice. Confirm your transaction with your lender and your attorney before you sign.