Non-SBA business acquisition loans: conventional, bridge and hard money
Short answer
A conventional (non-SBA) acquisition loan usually asks for more equity and a shorter term than SBA 7(a), but it's free of SBA's change-of-ownership rules: no guaranty fee, no $5 million cap, and room for an earnout, a seller who keeps a stake, or investors who take distributions. It tends to win on larger deals, asset-heavy businesses and buyers bringing 20% or more in equity.
SBA financing is the default for small business purchases for good reasons. It's not always the best tool. Here's where conventional debt earns its place, and what you give up.
Side by side
| SBA 7(a) | Conventional acquisition loan | |
|---|---|---|
| Buyer equity | 10% minimum of project cost | Lender's policy, commonly more |
| Term for goodwill | Up to 10 years | Often shorter; varies |
| Size | $5M per loan, $3.75M guaranty cap | No program cap |
| Fees | SBA upfront fee on guaranteed portion, plus lender costs | Lender costs |
| Valuation | Qualified Source above $350K; debt capped at value | Lender's choice |
| QoE | Required at $3M+ for most deals | Lender's choice; common on larger deals |
| Earnout | Prohibited | Negotiable |
| Seller keeps a stake | Not in an Initial Acquisition | Negotiable |
| Investor distributions | Restricted when investor money counts as equity | Covenant-based |
| Personal guaranty | Required from 20%+ owners | Usually required; sometimes limited |
| Citizenship | 100% U.S. citizen/national owners | Lender's policy |
When conventional tends to win
- The deal is bigger than SBA allows. Over $5 million of senior debt, or affiliates already using SBA guaranty capacity.
- You have real equity. With 25-35% down and strong collateral, the SBA guaranty adds cost without adding much.
- The structure needs flexibility. An earnout to bridge a valuation gap, a seller rollover of 10-20%, or a private equity-style capital structure.
- Owners or investors don't meet SBA eligibility, such as the 100% U.S. citizen or national ownership rule in effect since March 2026.
- Speed with a simple file. A lender that already knows you may move faster without SBA's documentation.
When SBA still wins
- The price is mostly goodwill and you want to put in close to 10%.
- Cash flow is adequate but not abundant, so the 10-year term is what makes coverage work.
- You're a first-time buyer without a banking relationship.
Why the term matters so much
Illustration, not a real deal
Say a business has $500,000 of EBITDA and a lender wants 1.25x coverage, so the most it can pay is $400,000 a year in debt service. At an assumed 9.5%, that supports about $2.58 million over 10 years but about $1.59 million over 5 years. The shorter term cuts borrowing capacity by roughly $1 million, which has to come from equity or a seller note.
Mixing the two
Some deals use SBA for the business and conventional debt for real estate or equipment. That's allowed if it isn't a piggyback structure: SBA doesn't allow a second loan made within 90 days for the same purpose where the SBA loan takes a junior or no lien position. A shared lien with a non-SBA loan of equal or longer maturity isn't treated as piggyback. A working capital line secured only by trading assets alongside an SBA working capital loan also isn't. Talk to your lender before arranging a second lender.
Exit to conventional later
A common path is SBA at purchase and a conventional refinance a few years later, once the business has performed under your ownership. See refinancing an SBA loan to conventional.
Hard money acquisition loans
Rarely. Hard money lenders lend short-term against hard collateral, usually real estate, at high rates and fees. Most of a small business's price is goodwill, which hard money lenders don't lend against, and the short term makes cash flow coverage nearly impossible. Buyers who look at hard money are usually better served by an SBA 7(a) loan, more seller financing, or an asset-based loan if the business is asset-heavy.
Searching for hard money usually means a buyer has hit a wall elsewhere: not enough cash, a deal declined, or a seller in a hurry. It's worth understanding why hard money rarely solves that.
Why it doesn't fit most business purchases
| What hard money needs | What a typical small business offers |
|---|---|
| Hard collateral, usually real estate | Mostly goodwill, some equipment |
| A quick exit (refinance or sale) within a short term | Repayment from operating cash flow over years |
| Margin to absorb high interest and fees | Margins sized for 10-year SBA debt |
Better options, depending on the problem
- Not enough equity: a seller note on full standby can cover up to half of SBA's 10% requirement; gifts count in full. See SBA equity rules.
- Declined by one lender: ask why. If it's cash flow or valuation, the price or structure needs to change; another lender won't fix that. If it's industry appetite, try lenders that know the industry.
- Seller in a hurry: negotiate time; most sellers accept SBA timelines if the buyer is organized.
- Asset-heavy business: an asset-based lender or equipment financing may fit.
- Real estate-heavy deal: a 504 loan or conventional mortgage for the property. See 7(a) vs 504.
If you're still considering it
Model the deal at the hard money rate and fees for the full term you might be stuck with it, not just the planned refinance date. Check with an SBA lender in advance whether it would refinance the debt; SBA's rules on refinancing debt that financed a change of ownership are specific, and lenders won't assume them away. Get a lawyer to review the default and extension terms.
Bridge loans
A bridge loan is short-term debt that covers a gap until permanent financing closes, such as funding a deposit or closing before an SBA loan funds. In small business purchases it's uncommon and expensive, and SBA rules limit it: borrowed money generally can't count as your equity unless it's repaid from a source other than the business, and a separate loan made around the same time can't push the SBA loan into a junior lien.
Bridge loans belong to real estate and larger corporate deals more than to small business purchases. When one appears in a small acquisition, it's usually solving a timing problem that has a cheaper fix.
Where buyers think they need one
- The seller wants to close before the SBA loan is ready.
- The buyer's equity is tied up (a house sale, a retirement account) and won't arrive in time.
- A large deposit is due at LOI or purchase agreement signing.
- The buyer wants to close conventionally now and refinance into SBA later.
Why SBA rules make bridges awkward
- Equity. SOP 50 10 8.1 counts a personal loan to a guarantor as equity only if repayment can be shown to come from a source other than the business's cash flow. A bridge repaid from the business, or from the SBA loan, isn't equity.
- Piggyback structures. SBA doesn't allow a lender to make a 7(a) loan where another loan for the same or similar purpose, approved within 90 days, takes a senior position over it.
- Refinancing. Using a later SBA loan to repay debt that financed a change of ownership is restricted. For example, a seller note can only be refinanced after 36 months in place and current. Don't assume an SBA take-out is available.
Cheaper fixes for timing problems
- Negotiate the closing date. Most sellers who want an SBA buyer understand the timeline.
- Keep deposits small and refundable, and hold them in escrow.
- Free up equity early: if you need a home equity loan for part of your injection, arrange it before you sign, and document how you'll repay it from outside the business. See home equity for an SBA down payment.
- Get your lender's document list on day one so the SBA loan isn't the bottleneck.
When a bridge might still make sense
On a conventional deal or a larger company acquisition with private credit, a bridge can fund a closing while permanent debt or equity is finalized. It will cost more than permanent debt and usually has a hard maturity. Get the take-out lender's written agreement to the structure first.
Common questions
Is a conventional acquisition loan cheaper than SBA?
It avoids the SBA guaranty fee, and on strong deals the rate can be competitive. But a shorter term means higher payments, which can make the deal fail the lender's coverage test.
Do conventional lenders require a valuation?
Many do, but they aren't bound by SBA's Qualified Source rule or the valuation cap. Each lender sets its own requirements.
Can I refinance an SBA acquisition loan into a conventional loan later?
Often, once the business has a track record under your ownership. Watch for the SBA prepayment fee on loans of 15 years or more in the first three years.
When could a hard money loan work in an acquisition?
When the deal is mostly real estate with an operating business attached, the buyer has a clear, quick refinance plan, and the numbers work even at a high rate. Even then, SBA rules on refinancing acquisition debt and on equity may get in the way.
Can hard money count as my down payment for an SBA loan?
Only if it's a personal loan repaid from a source other than the business's cash flow. Most hard money structures don't meet that.
Related guides
Sources
This guide explains rules and practice in plain English. It isn't legal, tax or credit advice, and SBA and IRS rules change. Check the current SOP, regulations and your lender's requirements before you rely on anything here. Examples with made-up businesses are illustrations, not real deals.