7 Mistakes You’re Making with Business Acquisition Financing (and How to Fix Them)

Acquiring a business is one of the most effective ways to scale your portfolio or enter a new industry. However, the financing landscape for business acquisitions is shifting rapidly, especially with recent changes to SBA lending standards.

Many entrepreneurs approach the acquisition process with outdated information, leading to avoidable delays or outright denials. At Samsbaloan, I specialize in helping business owners navigate these complexities to secure the capital they need.

Understanding the common pitfalls in the financing process can be the difference between a closed deal and a missed opportunity. Here are the seven most common mistakes business owners make with acquisition financing and, more importantly, how you can fix them.

1. Overlooking New Ownership Eligibility Rules

The SBA has implemented significant changes regarding who can own a business receiving federal financing. As of March 1, 2026, any business seeking SBA financing must be owned entirely by U.S. citizens or U.S. nationals.

This rule applies to both direct and indirect ownership, including holding companies and trusts. Previously, Lawful Permanent Residents (green card holders) were eligible, but this is no longer the case for new SBA-backed loans.

How to fix it:
Review your cap table early in the process. If your acquisition involves partners or investors who do not meet these citizenship requirements, you must restructure the ownership before applying. Consulting with a professional at Samsbaloan can help you determine the best path forward for your specific situation.

2. Carrying Unresolved Merchant Cash Advance (MCA) Debt

Merchant Cash Advances (MCAs) are often used for quick capital, but they are highly scrutinized during the underwriting process. A critical policy update in 2025 dictates that MCA debt can no longer be refinanced through an SBA loan.

If your business or the target acquisition has monthly MCA payments exceeding $5,000, it can severely impact your debt-to-income ratio. These high-cost obligations are viewed as a significant risk factor during the cash-flow analysis.

How to fix it:
Prioritize paying down high-cost, short-term debt before you begin the acquisition financing process. If the target business has existing MCAs, work with the seller to clear these obligations as part of the closing conditions. Reducing these monthly payments will strengthen your "cash-flowing" position and improve your chances of approval.

3. Neglecting Personal Credit Hygiene

Lenders require a personal guarantee for SBA acquisition loans, making your personal credit history a central part of the application. Even if the business itself is highly profitable, personal red flags can trigger an immediate denial.

Common issues include credit utilization rates above 30%, recent late payments, or unresolved tax liens. Underwriters look for a pattern of financial responsibility that mirrors the stability they expect from the business.

How to fix it:
Pull your credit report at least six months before you plan to acquire a business. Resolve any outstanding judgments or liens and focus on bringing your credit utilization below the 30% threshold. Aiming for a clean, stable credit profile is essential for securing the most flexible terms and lower interest rates.

4. Submitting Incomplete Financial Documentation

One of the most common reasons for delays in the underwriting process is disorganized or inconsistent paperwork. Lenders require a comprehensive look at both the buyer's and the seller's financial history to assess risk.

Missing tax returns, incomplete profit and loss statements, or contradictory debt schedules create a lack of transparency. If a lender cannot verify the numbers easily, they will likely move on to a less complicated file.

How to fix it:
Create a centralized digital folder for all financial documents, including three years of tax returns, current YTD financial statements, and a detailed list of all existing liabilities. Ensuring that your documentation is "clean and crisp" helps instill confidence in the lender and speeds up the approval timeline.

5. Failing to Verify Seller Discretionary Earnings (SDE)

When acquiring a business, buyers often rely on Seller Discretionary Earnings (SDE) to justify the purchase price. However, many buyers fail to verify these numbers through independent analysis.

Overstating the SDE can lead to overpaying for a business and, subsequently, failing to qualify for a loan because the real cash flow doesn't support the debt service. Lenders will conduct their own rigorous analysis, and if their numbers don't match yours, the deal may collapse.

How to fix it:
Conduct a thorough "quality of earnings" report. Work with a financial consultant to strip away one-time expenses and verify that the "add-backs" listed by the seller are legitimate and sustainable. This ensures you are acquiring a healthy, cash-flowing asset that can comfortably support its new debt.

6. Choosing a Lender Without Industry Expertise

Not all SBA lenders are created equal. Some specialize in real estate, while others focus on construction or manufacturing. Applying to a lender that doesn't understand the nuances of your specific industry can lead to a quick denial.

For example, a lender comfortable with professional services might be wary of the asset-heavy requirements of a construction firm. Each industry has different risk profiles and "underwriting" standards that a specialized lender will better understand.

How to fix it:
Research lenders who have a proven track record in your specific sector. At Samsbaloan, I help bridge this gap by connecting business owners with the right lending partners for their specific industry, whether it's real estate or startups.

7. Underestimating Post-Acquisition Working Capital

A common mistake is focusing entirely on the purchase price and neglecting the capital needed to run the business on day one. Acquisitions often come with transition costs, inventory needs, and immediate payroll obligations.

If you exhaust all your liquid cash on the down payment, you may find yourself in a "cash crunch" shortly after taking over. Lenders want to see that you have a "flexible" safety net to manage the transition successfully.

How to fix it:
Include a specific request for working capital within your loan structure. SBA 7(a) loans are particularly effective for this, as they allow for the inclusion of operational funds in the total loan amount. Planning for these needs upfront ensures you can focus on growth rather than just survival during the first 90 days.

Conclusion

Securing financing for a business acquisition is a multi-step process that requires precision and foresight. By avoiding these common mistakes: such as ignoring ownership changes or carrying high-cost debt: you position yourself as a strong, low-risk candidate for funding.

At Samsbaloan, I am dedicated to helping you navigate the complexities of the SBA landscape. Whether you are looking to acquire your first business or expand an existing portfolio, my goal is to provide the expert guidance needed to structure a deal that promotes long-term success.

Ready to take the next step in your business acquisition journey? Schedule an appointment today to discuss your financing options and strengthen your path to ownership.