[Crawl-Date: 2026-04-06] [Source: DataJelly Visibility Layer] [URL: https://travisbusinessadvisors.com/zh/articles/how-to-fund-a-business-acquisition] --- title: 7 Ways to Fund a Business Acquisition | Austin description: SBA loans, seller financing, ROBS, home equity, investor capital — every funding source for Austin business buyers and which combination works. url: https://travisbusinessadvisors.com/zh/articles/how-to-fund-a-business-acquisition canonical: https://travisbusinessadvisors.com/articles/how-to-fund-a-business-acquisition og_title: Travis Business Advisors og_description: Austin's Business Broker for Owners Who Built Something Worth Protecting og_image: https://storage.googleapis.com/gpt-engineer-file-uploads/attachments/og-images/598e6334-eb7e-4cdb-9bad-6a67b74e851b?Expires=1775422155&GoogleAccessId=go-api-on-aws%40gpt-engineer-390607.iam.gserviceaccount.com&Signature=XohJTtkAmsM6NTTTILYOicAWnVPn9C8RCQ9k%2Fn%2FmpCDFMbVeOM4XRpiB1SRlZzisI9hGBq67t7Elh5tKl6vxybSkR94jwptDGkvJFfPhm%2BxbX49eiEdX%2Bmy3Wo2t%2FRJOWybZmdE%2FM9d5a6QbvmWeDseCoNuvsP0ejJcjifGN62GUFqZQWv9oznuhXu0eE0WmDX4BRZi79sE0HYSJ1reAf9eTOueKDWPPjMIr%2FSO%2BcHEebakd679a0byTQHfqUxiWqMCP9cOu2zJwmbWEoFk%2FkUoOMzfjrtyMDbP%2BeEQMQIl22mwKx5qtqCr7hCojQgZF00diNfrALT5nOcvQDRiksQ%3D%3D twitter_card: summary_large_image twitter_image: https://storage.googleapis.com/gpt-engineer-file-uploads/attachments/og-images/598e6334-eb7e-4cdb-9bad-6a67b74e851b?Expires=1775422155&GoogleAccessId=go-api-on-aws%40gpt-engineer-390607.iam.gserviceaccount.com&Signature=XohJTtkAmsM6NTTTILYOicAWnVPn9C8RCQ9k%2Fn%2FmpCDFMbVeOM4XRpiB1SRlZzisI9hGBq67t7Elh5tKl6vxybSkR94jwptDGkvJFfPhm%2BxbX49eiEdX%2Bmy3Wo2t%2FRJOWybZmdE%2FM9d5a6QbvmWeDseCoNuvsP0ejJcjifGN62GUFqZQWv9oznuhXu0eE0WmDX4BRZi79sE0HYSJ1reAf9eTOueKDWPPjMIr%2FSO%2BcHEebakd679a0byTQHfqUxiWqMCP9cOu2zJwmbWEoFk%2FkUoOMzfjrtyMDbP%2BeEQMQIl22mwKx5qtqCr7hCojQgZF00diNfrALT5nOcvQDRiksQ%3D%3D --- # 7 Ways to Fund a Business Acquisition | Austin > SBA loans, seller financing, ROBS, home equity, investor capital — every funding source for Austin business buyers and which combination works. --- Video Guide Watch: Seven Ways to Fund a Business Acquisition — And the One Most Austin Buyers Actually Use 8 min A buyer sat across the table with a spreadsheet showing $180,000 in savings and asked the question every first-time acquirer asks: "Where does the rest of the money come from?" The business was priced at $1.6 million. He needed $1.42 million more — and had no idea that at least five different sources could fill that gap, each with different costs, risks, and strings attached. Every business acquisition has a capital stack — the combination of funding sources that adds up to the total purchase price plus closing costs and working capital reserves. Understanding each source, what it costs, and how it interacts with the others is the difference between a buyer who closes deals and one who stalls out at the LOI stage. ## Source 1: SBA 7(a) Loans — The Engine of Small Business Acquisition The SBA 7(a) loan is the dominant funding mechanism for business acquisitions under $5 million in the United States. It's not the cheapest money available — but it's the most accessible, and it's specifically designed for this purpose. **How it works.** The Small Business Administration doesn't lend money directly. It guarantees 75–85% of loans made by approved lenders — banks, credit unions, and specialized SBA shops. That guarantee reduces the lender's risk, which is why they'll finance acquisitions that a conventional bank would decline. **What it costs in 2026.** With the prime rate at 6.75% as of February 2026, SBA 7(a) variable rates range from 9.75% to 14.75% depending on loan size and term. On a $1.2 million loan over 10 years at 11.5%, monthly payments run approximately $17,000. The business's own cash flow services the debt — but only if the SDE is strong enough to maintain a debt service coverage ratio of at least 1.25x. **What it covers.** Typically 70–80% of the total purchase price. SBA requires the buyer to contribute a minimum 10% equity injection from personal funds — not borrowed money. The remaining 10–20% gap is where the other sources come in. **The real advantage.** Leverage. A buyer with $160,000 in cash can acquire a $1.6 million business. The business itself — its cash flow, its assets, its goodwill — secures the loan. That's a 10:1 capital multiplier that no other funding source provides. **When real estate is involved.** The SBA 504 program was built for this. It combines a conventional bank loan (50%), a Certified Development Company loan (40%), and the buyer's equity (10%). The CDC portion carries a fixed rate — currently in the 5–7% range — which protects against rate increases on the real estate component. For RE-heavy acquisitions like car washes, dental practices, and self-storage facilities, the 504 program can meaningfully reduce the total borrowing cost. This is one of the areas where Travis Business Advisors' specialization in real estate-intensive businesses makes a tangible difference. The interplay between SBA 7(a), SBA 504, and property valuation creates structural opportunities that generalist brokers often miss. The SBA 7(a) program guaranteed over $28 billion in loans in fiscal year 2024, making it the single largest source of federally backed small business financing in the country. The [SBA's 7(a) program page](https://www.sba.gov/funding-programs/loans/7a-loans) details current loan limits, eligibility requirements, and the differences between Standard 7(a), SBA Express, and Community Advantage loans. If you're buying a business under $5 million, this is almost certainly where your financing conversation starts. ## Source 2: Seller Financing — The Gap-Filler in Most Deals Seller financing shows up in 80–90% of SBA-financed business acquisitions. It's not a sign that something is wrong with the deal — it's standard architecture. **How it works.** The seller agrees to receive a portion of the purchase price over time rather than in full at closing. You sign a promissory note with defined terms: principal, interest rate, payment schedule, and maturity. **Typical terms in Austin.** The seller note usually covers 10–20% of the purchase price. Interest rates run 4–7% — cheaper than SBA debt. Terms of 5–7 years are standard. The critical nuance: the SBA typically requires seller notes to be on "full standby" for 24 months, meaning no principal or interest payments during the first two years. All business cash flow services the SBA loan first. **Why sellers agree to it.** Because it expands the buyer pool, often yields a higher total price, and generates interest income. A $300,000 seller note at 6% over 5 years generates approximately $48,000 in total interest — a respectable return secured by a business the seller knows intimately. **Why it's good for you.** Seller financing keeps the seller invested in your success during the critical transition period. A seller who's still owed money has every incentive to help you succeed — answering questions, introducing key relationships, and supporting the handoff. ## Source 3: Personal Savings and Investment Liquidations This is the most straightforward source — and the one the SBA looks at first. **What counts.** Cash in bank accounts, brokerage accounts, CDs, money market funds, and other liquid personal assets. The SBA requires a clear paper trail showing the source of every dollar. Money that appeared in your account last week with no explanation will be questioned. **What it costs.** No interest, no payments, no strings — but it represents the highest-risk capital in the stack because it's your personal money. Every dollar of equity you inject is a dollar you can't recover if the business fails. **The practical minimum.** For most SBA-financed acquisitions, plan on 10–15% of the total project cost in personal funds. On a $1.5 million deal, that's $150,000–$225,000. ## Source 4: Retirement Account Rollovers (ROBS) ROBS — Rollover for Business Startups — is legal, complex, and increasingly common among Austin buyers with substantial 401(k) or IRA balances. **How it works.** You create a new C-Corporation. That C-Corp establishes a retirement plan. You roll your existing 401(k) or IRA into the new plan — tax-free, penalty-free. The retirement plan purchases shares in the C-Corp. The C-Corp uses that capital to fund the acquisition. **What it costs.** No interest, no monthly payments, no debt. But the money is no longer in your retirement account — it's now equity in a business. Setup typically runs $5,000–$7,000 through a specialized ROBS provider, plus annual compliance fees of $1,500–$3,000. **The SBA angle.** ROBS funds count as equity injection because they're not borrowed money. A buyer with $400,000 in a 401(k) can convert that into acquisition equity without touching savings. Combined with an SBA loan, this can fund a $2–4 million acquisition. **The risk nobody mentions.** The IRS watches ROBS structures carefully. Compliance failures — using the C-Corp for personal expenses, failing to maintain the retirement plan, not paying yourself a reasonable salary — can trigger retroactive taxes and penalties on the entire rollover amount. You need a specialized ROBS administrator, not a general CPA. ## Source 5: Home Equity Here's where the confusion lives — and where the SBA rules matter most. **The critical distinction.** A home equity line of credit (HELOC) does *not* count as SBA equity injection. The SBA considers it borrowed money. However, proceeds from a cash-out refinance *can* count — because they've been converted to liquid personal funds. **When it works.** A buyer who refinanced their home, deposited the proceeds, and has had those funds seasoned for 60–90 days is on solid ground. A buyer who plans to refinance after signing the LOI is adding months of delay. **What it costs.** Current home equity rates run 7.5–9.5% — often cheaper than SBA debt but adding a second layer of personal liability. If the business fails, you're still making payments on your house. This deserves serious conversation with your spouse and your financial advisor before you proceed. ## Source 6: Family, Friends, and Private Investors The industry calls this "friends, family, and fools" — a name that's both unfair and instructive. Private capital can be the critical piece that makes a deal work, but it creates relationship dynamics that outlast the transaction. **Gift capital.** Counts as equity injection if documented with a gift letter stating no repayment is expected. The SBA will verify this. If the "gift" is actually a loan with a handshake repayment agreement, the SBA considers that fraud. **Private loans.** Count as equity injection only if on full standby for the life of the SBA loan — meaning no payments while the SBA debt is outstanding. Few private lenders agree to those terms. **Equity investment.** An investor takes an ownership stake in the acquiring entity. This is how search funds work — investors provide equity capital in exchange for a share of the company. The structure requires a clear operating agreement defining ownership, decision-making, buyout provisions, and exit timelines. **The relationship reality.** A $200,000 investment from a brother-in-law with a clear operating agreement and a defined 5-year buyout at 1.5x return is a business arrangement. A $200,000 loan from a parent with vague terms and emotional expectations is a recipe for Thanksgiving disasters. Structure it formally or don't do it at all. ## Source 7: Conventional Bank Loans For buyers with strong personal balance sheets, excellent credit, and significant collateral, conventional bank loans bypass SBA entirely. **The advantage.** Potentially lower interest rates, no SBA guarantee fee (which can add 2–3% to the loan amount), and faster processing — some banks close in 3–4 weeks versus 60–90 days for SBA. **The disadvantage.** Higher down payment — typically 20–30% versus SBA's 10–15%. On a $2 million acquisition, that's $400,000–$600,000 in cash versus $200,000–$300,000. Most first-time buyers don't have that kind of liquidity, which is exactly why SBA dominates the market. ## How They Combine: The Typical Austin Capital Stack In practice, most Austin business acquisitions in the $1–5 million range assemble the capital stack from three sources: The buyer's equity injection — typically 10–15% from personal savings, investment liquidations, or ROBS — sits at the base. The SBA 7(a) loan — typically 70–80% — provides the bulk. And a seller note — typically 10–15%, on standby for 24 months — bridges the gap. On a $2 million deal, that might look like: $200,000 from savings, $1.5 million from an SBA 7(a) loan, and $300,000 in a seller note at 6% on 24-month standby. Total monthly debt service on the SBA portion: approximately $21,200. Seller note payments begin in year three at roughly $5,800/month. The business needs to generate enough cash flow to cover both — plus your compensation, operating expenses, and a reasonable reserve. ## How We Help You Build Your Stack At Travis Business Advisors, we work with buyers long before the LOI stage to ensure the capital stack is solid. We help you get SBA pre-qualified with lenders who specialize in business acquisitions. We analyze deal structures that optimize the mix of SBA debt, seller financing, and personal equity. And for RE-heavy deals — where SBA 504 structures, property valuations, and lease-versus-purchase decisions add layers of complexity — we bring specialized expertise that most generalist brokers simply don't have. The money is available. The sources are well-established. The structures are proven. What separates buyers who close from buyers who don't isn't access to capital — it's understanding how capital works in this specific context. Your job isn't to fund the acquisition from one source. It's to assemble the right combination — at the right cost, with the right terms, and with the right protections — so the business you're buying can service the debt while paying you a living and building your equity. That's the stack. 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