Ten percent down, five-million ceiling, sixty-to-ninety-day approval cycle — and the lender shortlist that determines whether you close on time or get redlined at week ten.
SBA 7(a) is the most common acquisition-financing vehicle for first-time Texas business buyers under five million dollars. The mechanics are well-documented; the failure modes are not. Below is the math, and the parts the lender doesn't volunteer.
The headline mechanics.
Maximum loan amount $5,000,000. Buyer down payment typically 10% of the transaction (sometimes split between cash equity and seller note). Term up to ten years for a goodwill-heavy acquisition, twenty-five years if real property is included. Variable rate tied to prime plus 2.25-2.75%. Approval cycle sixty to ninety days from complete application to funding.
What lenders actually underwrite.
The buyer's personal financial statement and credit (700+ FICO baseline). Personal-guarantee coverage from all 20%+ owners. Two-to-three years of personal tax returns. Industry-relevant operating experience or a credible succession plan. The acquired business's three-year normalized cash flow at a debt-service-coverage ratio of 1.25x or better post-acquisition. Customer concentration risk in the target business (lenders push back hard above 20%).
The lender shortlist matters.
Not all SBA lenders are equal. Preferred Lender Program (PLP) status lets the bank approve loans internally without sending them to SBA central — that's the difference between a 60-day close and a 120-day close. Texas has roughly fifteen PLP lenders that specialize in business acquisitions. Knowing which lender fits which industry can compress the timeline by a month.
What disqualifies buyers.
Three things, in order: insufficient post-close working capital (lenders increasingly require six months of operating cash on top of the acquisition), industry-specific bars (some lenders won't touch restaurants, others avoid construction), and existing personal guarantees from prior failed businesses. Pre-qualification before LOI is non-optional — it protects the buyer's earnest money and tells the seller you're real.