# Can I use an SBA loan to buy an existing business?

**Short answer:** Yes. A 7(a) loan can fund all or part of a business purchase, as a stock or asset deal. 13 CFR § 120.202 allows it, and SOP 50 10 8.1, Appendix 15, sets the rules. A 504 loan can only fund the fixed assets.

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Last checked: 2026-11-08

Yes, a 7(a) loan can buy a business. 13 CFR § 120.202 lets a borrower purchase part or all of an owner's interest, or part or all of a business itself. SOP 50 10 8.1, Appendix 15, sets the rules for every 7(a) change of ownership.

## Conditions on every deal

- The sale must promote the sound development of the small business or preserve its existence.
- A 7(a) loan cannot be made solely to an individual. The small business must be the borrower or a co-borrower.
- The lender must demonstrate that you can operate the business and repay the loan from its cash flow.
- Financial due diligence is required on every transaction (Appendix 15, Para. A).

## What most deals need

An Initial Acquisition, the default category, needs equity of 10%, which cannot be reduced or eliminated. Debt service coverage must reach 1.25:1. A business valuation is required in most cases. Lenders can add their own requirements.

## Programs that cannot do it

CAPLines, the Export Working Capital Program and revolving facilities cannot fund a change of ownership (Section A, Ch. 2, Para. A). Manufacturers' Access to Revolving Credit (MARC) loans cannot either (Section B, Ch. 3, Para. A.2). A 504 loan can finance only the eligible long-term fixed assets in a sale (Section C, Ch. 1, Para. C.13).

## Sources

- [13 CFR § 120.202](https://www.ecfr.gov/current/title-13/section-120.202)
- [SOP 50 10 8.1, App. 15, introduction and Para. A (p. 362)](https://legacy.sba.gov/sites/default/files/2026-10/SOP%2050%2010%208.1%20Technical%20Policy%20Updates%20effective%20%2010.1.2026.docx)
- [SOP 50 10 8.1, Sec. A, Ch. 2, Para. A (p. 41)](https://legacy.sba.gov/sites/default/files/2026-10/SOP%2050%2010%208.1%20Technical%20Policy%20Updates%20effective%20%2010.1.2026.docx)
- [SOP 50 10 8.1, Sec. B, Ch. 3, Para. A.2 (p. 135)](https://legacy.sba.gov/sites/default/files/2026-10/SOP%2050%2010%208.1%20Technical%20Policy%20Updates%20effective%20%2010.1.2026.docx)
- [SOP 50 10 8.1, Sec. C, Ch. 1, Para. C.13 (about p. 239)](https://legacy.sba.gov/sites/default/files/2026-10/SOP%2050%2010%208.1%20Technical%20Policy%20Updates%20effective%20%2010.1.2026.docx)