It starts the way most acquisitions start — with a conversation, not a spreadsheet. Somewhere in your market, a 22-year-old HVAC company with roughly $2.4 million in annual revenue has an owner who is ready to retire, and a price near $1.6 million gets floated over coffee. Then comes the question that decides whether the deal actually happens: where does the money come from, and in what order does it arrive?
Most buyers cannot write that check alone. A typical purchase is assembled in layers — buyer equity, a senior loan (usually SBA-backed or conventional), and frequently a seller note bridging the gap between asking price and bank appetite. The layers have to satisfy one another. The seller wants a clean close. The lender needs the business's cash flow to cover the new debt with room to spare. You need enough liquidity left over to actually run the business on Monday morning.
What follows is the acquisition process in the order it really unfolds — what happens at each step, what you should have ready, and how long each phase commonly takes. For a broader map of the financing options first, start with our overview of business loans, then come back to the timeline.
Step 1 — Set Your Criteria and Budget (Weeks 0–3)
What happens now. You define the target in concrete terms: industry, size, geography, and what you can genuinely afford. Work backward from the price. On a $1.6 million deal, most lenders will expect an equity injection of roughly 10% of the project cost, plus closing costs, plus a working capital reserve that often adds a few months of expenses on top. In practice, that commonly means $170,000 to $220,000 of your own money in the deal — and more if the business's cash flow is thin or you have no experience in the sector.
What you need. A current personal financial statement, two to three years of personal tax returns, a clear accounting of liquid assets (retirement funds count only partially, and early-withdrawal penalties hurt), and an early, non-committal read on whether the seller would consider carrying a note.
How long it takes. One to three weeks of honest self-assessment. This step costs nothing; skipping it costs deals.
Step 2 — Build Your Borrowing Profile (Weeks 2–5)
What happens now. You talk to a lender before you talk to a seller. Underwriters evaluate the whole picture: credit history, liquidity, net worth, existing debt, and — for acquisitions specifically — industry experience. A buyer with ten years in HVAC who keeps the seller for a sixty-day transition is a different file than a first-timer from an unrelated field. Program choice matters, too. The SBA 7(a) program, which runs up to $5 million, is the workhorse for acquisitions because it pairs long terms with more flexible collateral rules — see SBA loans for how those parameters work.
Pre-qualification is not a guarantee, but it tells you which deals are worth chasing. It also strengthens your letter of intent, because sellers and brokers read a credible buyer differently from a hopeful one.
What you need. The Step 1 documents, plus a short description of the target profile you are hunting and the amount you expect to borrow.
How long it takes. One to three weeks with a responsive lender. A good loan officer will tell you within days what profiles they can and cannot finance.
Conventional versus SBA is the choice that shapes everything downstream. Conventional acquisition loans commonly ask for 20–30% down and want collateral to cover the loan; in exchange, they move faster and come with fewer procedural requirements. SBA 7(a) leans the other way — smaller injections, longer terms, and more flexible collateral rules — which is why it dominates acquisitions under roughly $2 million. If the deal only works at 10% down, the SBA path is usually the one; if speed is worth more than leverage, conventional can win.
Step 3 — Find the Business and Negotiate the Letter of Intent (1–3 Months, Highly Variable)
What happens now. The search itself can take months — weeks for brokered deals, longer for off-market ones. Once you identify the target, the letter of intent becomes the first document that matters to your lender. The terms that move financing: total price, asset purchase versus stock purchase, how much seller financing is included, how much working capital stays in the business at closing, and how long the seller will stay involved. Asset sales are commonly preferred because they limit the liabilities you inherit, though licensing, contracts, and tax positions can complicate the choice.
What you need. An attorney and an accountant before you sign anything binding, plus discipline about seller-financing terms. A seller note structured on full standby can, in some SBA structures, count toward your equity injection — but only if the terms are right. Ask a lender before you promise the seller anything you cannot deliver.
How long it takes. One to three rounds of negotiation over one to three weeks once the business is found. Hesitation here is normal; paralysis is expensive, because sellers often have other buyers waiting.
Step 4 — Structure the Deal So It Can Be Financed (Runs Parallel to Steps 2–3)
What happens now. Price is what you negotiate. Structure is what gets approved. The financing stack is built from equity, senior debt, and often seller paper, and the pieces are interdependent: more seller financing can reduce the loan amount, a larger injection can offset thinner coverage, and an earn-out can bridge a valuation gap without increasing the cash needed at closing. If the seller owns the building, decide early whether you are buying the real estate, leasing it, or both. Real estate purchased alongside a business is commonly split into a separate facility — sometimes pairing a bank loan with a CDC loan through the SBA 504 program, which finances up to 90% of the project with the CDC portion capped at $5.5 million.
What you need. A lender conversation before the structure is locked in. This is the step where experienced advisors earn their fee, because some structures that read well on a term sheet fail underwriting two weeks later — and by then you have signed things.
How long it takes. Parallel to everything else. Days of actual work, spread across several weeks of back-and-forth.
Step 5 — Due Diligence (30–60 Days, Sometimes Longer)
What happens now. You verify what you are buying, and your lender verifies it independently. The core of it: tax returns reconciled against profit-and-loss statements, customer concentration (heavy dependence on one customer is a common concern lenders will price or structure around), equipment condition, lease terms and assignability, key contracts, and — if real estate is involved — an environmental review, typically a Phase I assessment. Sellers sometimes push back on the pace here; diligence is also where hidden problems surface, which is exactly why it exists.
What you need. A quality-of-earnings review by an accountant who has worked on acquisition deals before, and patience. Diligence requests come in waves, and slow responses add weeks that sellers rarely forgive.
How long it takes. Commonly 30–60 days, with real estate, franchise approvals, or professional licensing adding time on top.
Step 6 — Lender Underwriting and Commitment (30–90 Days)
What happens now. The underwriter tests the deal against the lender's credit policy and, for SBA loans, the agency's standard operating procedures. The central test is coverage: will the business produce enough cash to service all debt, commonly measured at 1.25x or better? Collateral comes next — business assets, and very often a personal guarantee; depending on loan size and collateral, a lien on your home may be in scope. A business appraisal and third-party verifications are normal parts of the file, and terms commonly stretch to ten years for general purposes and up to 25 years when real estate is involved.
What you need. Responsiveness. When the loan officer forwards a condition, treat it like a deadline, because the file is either moving or it is not. If you are unsure how seller notes interact with the equity requirement, our FAQ covers the common versions of that question. On cost, ask early how fees stack — packaging, origination, and any guarantee fees vary by loan size and term — and compare offers on total dollars rather than one quoted number.
How long it takes. Conventional: three to six weeks after a complete file. SBA: commonly 45–90 days, with the clock effectively resetting every time information sits.
Step 7 — Close and Transition (2–4 Weeks)
What happens now. Escrow, final documents, funding — and then the part buyers underestimate: running the business. Month-one mistakes are usually not strategic; they are cash-management mistakes. If the business has seasonality or growth plans, set up a working capital line alongside the acquisition loan so surprises do not land on your personal credit card.
What you need. A transition plan — two to four weeks of seller overlap is common — a non-compete agreement, and warm introductions to key customers and suppliers before the owner walks out the door.
How long it takes. Two to four weeks from commitment letter to keys in hand.
The Realistic Timeline, Start to Finish
| Phase | Typical duration | What you have when it is done |
|---|---|---|
| Criteria and pre-qualification | 2–5 weeks | A financing profile and a budget |
| Business search | 1–6 months | A target under negotiation |
| Letter of intent | 1–3 weeks | Signed LOI and exclusivity |
| Due diligence | 30–60 days | Verified financials and no surprises |
| Underwriting | 30–90 days (SBA commonly 45–90) | Commitment letter |
| Closing and transition | 2–4 weeks | Keys, files, and a running business |
From signed LOI to closing, buyers commonly spend three to six months. The search phase is the wildcard — some buyers find their business in six weeks; others look for two years. Plan the financing in parallel, not in sequence, and the calendar compresses.
Two scheduling truths are worth holding onto. Diligence and underwriting overlap in practice — underwriters can start credit work while diligence documents trickle in, which is why organized buyers finish faster than the table implies. And sellers remember hesitation: a buyer who renegotiates after diligence has weaker standing than one whose initial offer reflected what the file could actually support.
Every acquisition has its quirks, and the difference between deals that close and deals that stall is usually structure, not price. Tell us what you are looking at through our contact page, and Tesni, LLC will give you a straight assessment of how the pieces would need to fit.