I’m Michael DiVita — DRE #01372066 | NMLS #241655, DiVita Home Finance (DRE #01818285 | NMLS #323700), Tiburon, CA. I’ve been in California mortgage lending since 2000 and founded DiVita Home Finance in 2007. Call (800) 239-1103.
The SBA 7(a) loan is the most powerful tool for buying an existing California business. With as little as 10% down, you can acquire a profitable business and use its own cash flow to repay the loan. Here’s how it works. See also: SBA Loans CA | SBA 7(a) | SBA Restaurant Loans.
What SBA Business Acquisition Covers
An SBA 7(a) acquisition loan can fund the purchase price of the business — including goodwill, equipment, inventory, and accounts receivable — plus working capital for the ownership transition, lease improvements or build-out needed, and seller training costs included in the deal. Maximum loan amount: $5M. This is a comprehensive funding tool, not just a purchase price loan.
Business Valuation for SBA Lending
For any business acquisition over $250,000, the SBA requires a business valuation from a qualified appraiser. Common valuation methods: SDE (seller’s discretionary earnings) multiple for small businesses, EBITDA multiple for larger acquisitions, and asset-based valuation for asset-heavy businesses. Typical SDE multiples in California: retail 1.5–2.5x, restaurants 1.0–2.0x, service businesses 2.5–4.0x, medical practices 3.0–5.0x. Understanding how your target business will be valued before you make an offer prevents overpaying and improves your loan approval odds.
Deal Structure
A common California business acquisition structure: 80–90% SBA 7(a) loan, 10% buyer down payment, with optional 10% seller carry subordinated to the SBA loan. The seller carry reduces the buyer’s required down payment and the SBA loan size simultaneously — lenders like it because it shows the seller has skin in the outcome. The seller carry is typically structured as a standby note (no payments during the SBA loan term) to keep your debt service manageable in the transition period.
Key Documentation Required
3 years business tax returns, 3 years P&L and balance sheets, interim financials for the current year, complete asset list, current leases, franchise agreement if applicable, a signed business purchase agreement, and a personal financial statement from the buyer. For acquisitions, the seller’s documentation is equally important — lenders will scrutinize 3 years of business performance. Start gathering seller financials early in due diligence so you’re not waiting on documents when you’re ready to submit.
Get Pre-Qualified to Buy a California Business
Call me before you make an offer — I’ll tell you how much you can borrow and what the deal structure looks like before you’re in escrow.
Frequently Asked Questions
How much down payment do I need to buy a business with an SBA loan in California?
The SBA 7(a) program requires a minimum 10% equity injection (down payment) for business acquisitions. That 10% can come entirely from the buyer, or partially from a seller carry note. Example: a $1M business acquisition could be structured as $900,000 SBA 7(a) loan + $100,000 buyer down payment. With a seller carry, you could structure it as $800,000 SBA loan + $100,000 buyer down + $100,000 seller carry note — still 10% equity injection but with a smaller SBA loan. Startups or acquisitions of businesses with limited operating history may require 20–30% down, since the risk profile is higher. Call me with the business purchase price and I’ll map out the structure before you make an offer.
What types of California businesses can be acquired with an SBA 7(a) loan?
SBA 7(a) loans can fund acquisitions of most for-profit California businesses: restaurants, retail stores, service businesses (cleaning, landscaping, medical, dental), professional practices (accounting, law, physical therapy), franchises, manufacturing operations, and more. Ineligible businesses include those involved in illegal activities under federal law, passive real estate investment, financial speculation, and certain restricted industries (gambling, adult entertainment). The business must operate in the US, meet SBA size standards for its NAICS code, and demonstrate ability to repay from business cash flow. Most operating California small businesses with documented earnings qualify.
How does the SBA evaluate the value of a business I want to buy in California?
For SBA acquisitions over $250,000, the lender orders a business valuation from a qualified business appraiser. The appraiser reviews 3 years of tax returns, P&Ls, and the purchase agreement, then applies a valuation method appropriate to the business type — most commonly a seller’s discretionary earnings (SDE) multiple for small businesses or EBITDA multiple for larger operations. The SBA will not lend more than the appraised business value. If you’re paying a premium above appraised value (goodwill), the excess must come from buyer equity. Understanding typical valuation multiples for your target industry before you negotiate price prevents you from making an offer the SBA won’t support. I can walk you through realistic expectations for your target business type.
Talk to Michael Directly
DiVita Home Finance | Tiburon, CA | In lending since 2000, founded DiVita Home Finance in 2007. Michael DiVita DRE #01372066 | NMLS #241655. Company DRE #01818285 | NMLS #323700.
💬 Text: (310) 849-9124
