Option 1: Seller Financing
With seller financing, the owner who's selling the firm lets you pay them over time instead of getting all the money from a bank. It can be a great setup when you find it. You skip bank underwriting, and the terms are often more flexible. In some deals, your payment to the seller is a percentage of each year's receipts, so a slower year doesn't mean a payment you can't cover.
The catch is that seller financing has become harder to find. Sellers see their peers getting large payouts at closing, and they're getting calls from brokers and buyers, so many expect to be paid up front. If a seller is open to financing part or all of the deal, it's worth exploring, but plan for the more likely scenario of working with a lender.
Option 2: A Conventional Bank Loan
A conventional loan from your local bank is the other traditional route. These loans generally require more cash from you at closing, and terms tend to run five to seven years. A few lenders go longer, but they're harder to find.
Putting more cash in isn't a bad thing if you have it, since it means less debt and a lower monthly payment. The shorter term works against you, though, because the same loan spread over fewer years means higher payments, and those payments have to come out of the firm's cash flow.
Option 3: An SBA 7(a) Loan
For buyers who don't have a large amount of cash available, the SBA 7(a) program is often the first stop. The two biggest differences from a conventional loan are a 10-year term, which keeps monthly payments lower, and a smaller down payment.
SBA lenders generally look for a 10% equity injection on a business purchase. Under current rules, the seller can cover up to half of that with a seller note, as long as the note is on "full standby," meaning the seller won't receive payments on it for the life of the SBA loan. Many sellers agree to this, and brokers who work with these deals know the requirements well.
Eric shared a simple example. On a $400,000 firm, a 10% equity requirement is $40,000. If the seller carries $20,000 of that on standby, you could buy the firm with about $20,000 of your own money, before accounting for working capital and closing costs. That's still a meaningful amount for someone early in their career, but it's far more accessible than many buyers assume.
What Lenders Look At: Debt Service Coverage Ratio
Lenders will review your credit, your experience, and the details of the deal, but Eric says one number matters before anything else: the debt service coverage ratio. It measures whether the business you're buying generates enough cash to cover the loan payments with some cushion left over. "Everything else could be perfect," he says, but if the business doesn't meet the minimum ratio, the rest doesn't matter. "It doesn't matter how much they like you, it doesn't matter how much collateral you have."
For a first-time acquisition, lenders generally want to see a ratio of at least 1.25, which means $1.25 of cash flow for every $1 of annual loan payments. To show how the math works, Eric used a $320,000 loan, the amount Marcus Dillon, CPA, borrowed when he bought the firm that became Dillon Business Advisors in 2011, and applied today's typical SBA terms:
A 10-year term at prime plus 2% (prime was 6.75% at the time of the conversation, so 8.75% total) puts the monthly payment at about $4,000. That's roughly $48,000 a year in principal and interest, which lenders call your annual debt service. Multiply $48,000 by 1.25, and the firm needs to generate about $60,000 a year in cash flow, above what the owner needs to live on, to clear the bank's minimum.
You can run this calculation on any loan amount with a basic online loan calculator, and it's a smart step before you make an offer. Under the SBA's updated rules, every SBA-financed change of ownership also requires an independent valuation from a credentialed source, so plan for that in your timeline and budget.
Buying a Firm When You Already Own One
If you already run a profitable firm, you have a few advantages. The bank can look at the combined cash flow of both businesses, which can support a larger purchase price than the target firm could support on its own. You also bring a team, systems, and a track record that make a lender more comfortable.
The SBA treats some of these deals as "expansions," and the rules for them changed on October 1, 2026. To qualify, the buyer generally needs at least two full fiscal years in business under current ownership, positive net worth, and a closely related industry code. Lenders may reduce or even eliminate the 10% equity requirement for an expansion if the buyer has enough liquidity and working capital, which can make 100% financing possible. That decision is up to the lender, though, and Eric is quick to add a word of caution: "Just because you can do that does not mean you should." The numbers have to make sense with a comfortable margin, not just on paper.
Dillon Business Advisors, the firm Marcus founded and leads with Rachel Dillon, used a mix of approaches over the years. For a $1.5 million acquisition in 2025, DBA's leadership team chose not to tie up the owners' personal capital and combined a bank loan with seller notes that were paid off in roughly equal parts over three years. DBA put about $120,000 in cash toward the deal.
How to Get Your Financing Ready Before You Find a Firm
Good firms don't stay on the market for long, and buyers with their financing in order have a clear edge. In a brokered deal, it's not unusual for a seller to hear from dozens of interested buyers. Eric's advice is to prepare the way you would for a home purchase:
- Talk to lenders early. "Banks generally don't charge you like lawyers do by the hour," Eric points out, "so you'll get a lot of free education." A conversation now will tell you what they'll need later.
- Get your personal finances in shape. You'll likely personally guarantee the loan, so pay down debt where you can and hold off on any large purchases that could affect your credit score.
- Fill out a personal financial statement and get pre-qualified. Sharing a pre-qualification letter and proof of funds with a broker shows you're a serious, ready buyer.
- Shop your deal. Even with one set of SBA rules, lenders interpret them differently. "You could take one deal to ten different lenders and get 15 different answers," Eric says, which is where an independent loan advisor can help.
A quick note: SBA rules, interest rates, and lender requirements change regularly, and the details here reflect conditions in fall 2026. Talk with a lender, your attorney, and your tax advisor about your specific situation before you make an offer.
Next Steps: Plan Your Acquisition Financing
Financing is one piece of a bigger decision, and it's easier to evaluate a firm when you already know what you can afford. Start by running the debt service coverage math on the size of firm you have in mind, then have an early conversation with a lender or loan advisor so you know where you stand. When the right opportunity comes up, you'll be ready to move — but first make sure your firm is ready for it.
If you're thinking about buying a firm and want help pressure-testing the numbers, the fit, or the integration plan, Collective by DBA's advisors have been through acquisitions and divestitures from both sides of the table. Schedule a call with Rachel Dillon at Collective by DBA to talk through your plans.
If you'd rather start by learning alongside other firm owners, explore Collective by DBA membership. Members get access to a community of accounting firm leaders working through the same growth questions, plus templates, CPE-eligible webinars, and Streamlined OS to help them decide what to focus on first.
