The Top Two Ways to Purchase a Business without Collateral

By Michael D. Rubin, CEO & Founder · Updated September 2026 · 770 words

The two most common ways to buy a business without much collateral are an SBA-guaranteed loan, usually through the SBA 7(a) program, and seller financing, where the owner lets you pay part of the price over time. Many acquisitions use both together. Neither is free money: you will still need some cash of your own, a credible plan and, in most cases, a personal guarantee.

This article is written for buyers. If you are the owner being asked to finance part of the price, the same mechanics apply from the other side of the table.

Why collateral is the sticking point

Banks lend against two things: cash flow that can repay the loan, and assets they can take if it does not. When you buy a service, distribution or light manufacturing company, much of what you pay for is goodwill, meaning customer relationships, reputation and a trained team. Goodwill is poor collateral. A buyer without real estate or other assets to pledge can find conventional banks unwilling to lend enough, even when the business itself earns plenty to cover the payments.

That gap between what the business earns and what a bank will lend against is exactly what the two routes below are designed to bridge.

Way one: an SBA 7(a) loan

The SBA does not usually lend the money itself. It guarantees a large share of loans that approved banks and other lenders make, which lets them finance deals they would otherwise decline, including acquisitions backed mostly by goodwill. The program is widely used for smaller business purchases. SBA guidelines are meant to keep a lack of collateral alone from sinking an otherwise sound loan, but lenders still take whatever collateral is available, which can include business assets and sometimes personal assets such as home equity.

Expect the lender to focus on:

• The business's cash flow over the last three years, and whether it covers the new debt with room to spare
• Your own experience in the industry or in running a company
• Your equity injection, the cash you put in, which can come from savings and in some cases from investors or a documented gift
• Your personal credit and a personal guarantee
• A clean set of seller financials, tax returns and a signed purchase agreement

Way two: seller financing

In seller financing, the owner accepts part of the price as a promissory note, a loan you repay over several years with interest, instead of cash at closing. It is common in smaller acquisitions, and asking for it is not an insult; many sellers expect the question. For the seller it can mean a higher total price and more buyers to choose from. For you it reduces the cash and bank debt needed, and it signals that the seller believes the business will keep performing.

Seller notes also combine with SBA loans: the bank loan covers most of the price, your cash covers the down payment and the seller carries a portion. SBA rules can restrict payments on a seller note for a period, sometimes requiring it to sit on standby with no payments at all, and those rules change from time to time. Ask your lender for current requirements before you make an offer. If the seller has to wait for payments, expect to offer something in return, such as a higher interest rate or better security.

Making your offer financeable

Owners of good companies usually hear from several buyers, and they favor the one most likely to close. Before you offer, get prequalified with a lender, know exactly how much cash you can commit, and be ready to show your experience and a transition plan. Propose a structure that works for the seller as well as for you: clear note terms, the security the seller receives (often a lien behind the bank's) and a realistic timetable. Our answer on comparing an all-cash offer with one containing seller financing shows how sellers weigh offers like yours, which helps you write a stronger one.

Free help exists too. SCORE, a nonprofit network of volunteer business mentors, can review your plan, and an experienced SBA lender will tell you early whether a particular deal is workable.

Where MDR & Associates fits for buyers

MDR & Associates represents sellers, so we do not act for buyers, but the companies we sell are open to qualified buyers who register, sign an NDA and complete a financial profile. On the deals we bring to market we can arrange SBA, conventional and seller-financed structures; see business financing. If you are looking for a company in Texas, start at buy a business or contact us.

Where this fitsSell your business in Texas →

Questions owners ask next

How much cash do I need to buy a business with an SBA loan?

It depends on the price, the lender and current SBA rules, which set a minimum equity injection that changes from time to time. Plan for a meaningful down payment from your own funds, plus reserves for working capital and closing costs. Ask two or three SBA lenders for their current terms before you make an offer.

Will a seller finance the whole purchase price?

Rarely. Most sellers want a substantial part of the price in cash at closing, and a note is usually a minority of the total. Offering some cash of your own, bank financing for most of the rest and a reasonable seller note makes a far more credible offer than asking the seller to carry everything.