Why buyer's counsel matters in SBA acquisitions: The SBA lender's attorney represents the lender. The seller's attorney represents the seller. You need someone whose sole job is protecting your interests — reviewing the APA for buyer-favorable terms, structuring indemnification to protect you post-closing, catching issues with purchase price allocation that cost you tax dollars, and ensuring the SBA Authorization letter conditions are satisfied without last-minute closing delays.
SBA 7(a) Loan Calculator
Model your acquisition financing with real-time amortization and equity injection analysis
Purchase Price Allocation Optimizer
Allocate your purchase price across asset categories to maximize depreciation benefits
12-Week Acquisition Timeline
Standard LOI-to-closing timeline for SBA 7(a) business acquisitions
Due Diligence Checklist
Interactive 65+ item checklist covering all diligence categories for business acquisitions
APA Key Provisions
Critical provisions that protect buyers in asset purchase agreements
| Provision | Buyer's Position | Typical Range |
|---|---|---|
| Indemnification Basket | Deductible threshold before seller indemnifies. Lower is better for buyer. | $10K-$25K (1-2.5% of purchase price) |
| Indemnification Cap | Maximum seller liability. Higher is better for buyer. | 10-20% of purchase price |
| Survival Period | How long reps & warranties survive closing. Longer protects buyer. | 12-18 months (24+ for fraud) |
| Non-Compete Scope | Geographic and temporal restrictions on seller. Broader protects buyer. | 2-5 years, 25-mile radius (varies by state) |
| MAC Clause | Right to walk if material adverse change occurs between signing and closing. | Revenue/enrollment drop >10-15% |
| Holdback/Escrow | Portion of price held in escrow for post-closing adjustments. More protects buyer. | 5-10% for 6-12 months |
| Seller Standby Note | Seller-financed portion on SBA full standby. Reduces buyer's equity injection. | 5-15% of price, 24-month standby |
Industry-Specific Acquisition Guide
Key legal considerations by business type
- State licensing transfer application
- Enrollment verification & parent agreements
- Staffing ratios & compliance history
- Inspection reports (last 3 years)
- Interim management agreement (if needed)
- Health department inspection history
- Liquor license transfer (ABC application)
- Lease assignment & landlord consent
- FF&E inventory & equipment condition
- Supplier/vendor contract assignments
- Phase I Environmental Site Assessment
- Equipment appraisals & maintenance logs
- Contractor license transferability
- Customer concentration analysis
- Workers' comp experience modifier
- Professional license requirements
- Patient/client record transfer (HIPAA)
- Non-solicitation of staff & clients
- Malpractice insurance tail coverage
- Managed care contract assignments
Acquisition Legal Services
- Line-by-line APA review
- Issue-flagging memo
- Redlined revisions
- Indemnification analysis
- Allocation review
- LOI review & DD checklist
- APA drafting or review/redline
- Non-compete & transition agreements
- SBA Authorization letter compliance
- Closing coordination
- Purchase price allocation strategy
- LOI term review
- Deal structure analysis
- SBA requirement clarification
- Negotiation strategy
- Risk assessment
Frequently Asked Questions
SBA 7(a) loans can finance the purchase of an existing business including tangible assets (equipment, inventory, real estate), intangible assets (goodwill, customer lists, licenses), and working capital. The SBA guarantees up to 85% of loans under $150K and 75% of loans over $150K, with maximum loan amounts up to $5 million. Buyers typically need 10-20% equity injection from documented sources.
The allocation divides your purchase price among FF&E (5-7 year MACRS depreciation), real estate (39-year building, land non-depreciable), goodwill (15-year amortization under IRC §197), non-compete (15-year amortization), and consulting/transition (ordinary income to seller). A buyer-favorable allocation maximizes the amount in fast-depreciating categories like FF&E, reducing your taxable income faster. The allocation must be defensible with the IRS and agreed upon by both parties — Form 8594 is filed by both buyer and seller.
Yes. The SBA lender's attorney represents the lender, not you. The seller's attorney represents the seller. You need counsel whose sole job is protecting your interests in the APA, making sure the reps & warranties actually mean something, and catching the issues that cost buyers money after closing — undisclosed liabilities, enrollment misrepresentation, license transfer problems, unfavorable purchase price allocations. The cost of buyer's counsel (typically $3,600-$6,000 for a standard SBA deal) is a fraction of the cost of discovering post-closing problems without contractual remedies.
A seller standby note is when the seller finances part of the purchase price but agrees to defer all payments. SBA requires seller notes to be on "full standby" for 24 months — no payments of principal or interest during that period, and the note must be subordinate to the SBA loan. This is commonly used when the buyer's equity injection needs supplementing. The note terms must comply with SBA SOP 50 10.
A MAC clause gives the buyer the right to walk away from the deal (or renegotiate) if a material adverse change occurs between signing the APA and closing. For business acquisitions, this typically covers significant revenue declines, loss of key customers or contracts, regulatory changes affecting the business, or discovery of undisclosed liabilities. The definition of "material" is heavily negotiated — sellers want it narrow, buyers want it broad.
Typical timeline is 8-12 weeks from signed LOI to closing. Phase 1 (weeks 1-3): due diligence and LOI review. Phase 2 (weeks 3-6): APA drafting and negotiation. Phase 3 (weeks 4-8): SBA lender coordination. Phase 4 (weeks 8-12): closing mechanics. Delays commonly come from SBA Authorization letter conditions, license transfers (especially for regulated businesses like childcare or healthcare), or seller disclosure issues discovered during diligence.