Property, acquisitions and ownership transitions
50 answers. Written by the celerfunding.com editorial team from official sources. Each answer shows where it applies and when its sources were read.
What does SBA 504 financing cover?
SBA 504 financing covers major fixed assets, such as owner-occupied real estate and large equipment, plus some qualifying debt refinancing. It does not cover working capital, inventory or speculative rental property.
It is long-term, fixed-asset financing for eligible operating for-profit small businesses located in the US. You apply through an SBA-certified Certified Development Company (CDC), which works with a senior lender on the project.
The CDC is a nonprofit intermediary. That does not make nonprofits eligible borrowers.
Size, project and borrower tests apply. Nothing here predicts approval.
If you are planning a purchase, ask a CDC early which costs are eligible and what the lender will need. Also read SBA's 504 page for current terms.
Next: SBA 504 loans
Sources (read 2026-10-31): SBA 504
How can I finance buying a business or taking over from an owner?
Buyers often combine several sources instead of relying on one loan. A deal can mix senior debt, seller financing and quasi-equity.
BDC describes acquisition loans, seller financing, senior debt and mezzanine or quasi-equity as separate structures. Seller financing and equity should not be mistaken for grants.
In the US, SBA 7(a) loans, made by participating lenders with an SBA guaranty, can be used for ownership changes among other purposes. Lenders look at creditworthiness and repayment capacity.
The mix affects your cost, your repayment burden and who holds control of the company. Valuation, tax and legal points matter here, so get independent professional advice before signing.
Nothing here predicts approval.
A good next step is to map each source you might use against its conditions, and ask each lender what it requires for an acquisition.
Next: Business funding
Sources (read 2026-10-31): financing types; SBA lending
Can an SBA 7(a) loan be used to buy a business or buy out a partner?
Yes, SBA says 7(a) loans can be used for a complete or partial change of ownership. That can cover buying a whole business or buying a share of one.
The loan comes from a participating lender with an SBA guaranty, not from SBA itself. You work directly with the lender, and the paperwork depends on the loan size and the lender's process.
The business must be an operating, for-profit US business that meets SBA size rules. It must also be creditworthy, show a reasonable ability to repay and be unable to get the credit on reasonable terms elsewhere. SBA lists a $5 million maximum loan amount.
The same program also lists real estate, equipment and working capital as uses, so a deal may combine several purposes. Nothing here predicts approval.
A good next step is to use SBA Lender Match or your local SBA district office, then ask a lender what documents it wants for an ownership change.
Next: SBA 7(a) loans
Related: How can I finance buying a business or taking over from an owner?
Sources (read 2026-11-01): SBA lending
How is a typical SBA 504 real estate project funded?
A typical SBA 504 project has three parts: a bank-type senior loan, a loan through the CDC and the borrower's own equity. SBA's lender guidance describes the senior loan as covering up to 50% of project cost with a senior lien. The CDC loan, backed by a 100% SBA-guaranteed debenture and a junior lien, covers up to 40%. The borrower contributes at least 10%.
SBA says this is what a project 'typically' includes, so a specific deal can differ.
SBA lists a $5.5 million maximum 504 loan, with 10-, 20- and 25-year terms and rates tied to 10-year US Treasury issues. The 504 program is for major fixed assets, not working capital or inventory.
You apply through a Certified Development Company, which works with the senior lender. Nothing here predicts approval.
Ask a CDC to model your project and say what the lender will require.
Next: SBA 504 loans
Related: What does SBA 504 financing cover?
Sources (read 2026-11-01): SBA lenders: 7(a), CDC/504 and Microloan programs overview; SBA 504
How long can I take to repay an SBA loan used for real estate?
SBA's lender guidance lists terms of up to 25 years for real estate under both the 7(a) and 504 programs. Equipment terms are shorter.
For 7(a), SBA says 10 years or less is the general rule, unless the loan finances or refinances real estate or equipment with a useful life over 10 years. Real estate can run to 25 years including extensions.
For 504, SBA's lender comparison shows 25 years for real estate and 10 years for equipment. The 504 borrower page lists 10-, 20- and 25-year maturities.
Interest rates differ by program. 7(a) rates are negotiated up to SBA maximums. 504 rates are fixed and tied to US Treasury issues.
The real term depends on the lender, the asset and the loan type. Nothing here predicts approval or a rate.
Ask each lender or CDC for the term in writing, and compare total cost, not only the monthly payment.
Next: SBA 504 loans
Sources (read 2026-11-01): SBA lenders: 7(a), CDC/504 and Microloan programs overview; SBA 504
Can I use government-backed financing to buy a building just to rent it out?
Generally no. The main government-backed small business loan programs are meant for businesses that operate, not for pure property investment.
SBA says 504 loans cannot be used for speculation or investment in rental real estate, and are not available to passive or speculative businesses. SBA 7(a) requires an operating business.
In Canada, the Canada Small Business Financing Program guidelines say a person or corporation that buys property only to rent it out is not an eligible borrower. They point to Canada Mortgage and Housing Corporation for that kind of purchase. A holding corporation that does not operate a business is also not eligible.
There are narrow rules around leasing out surplus space. Check the details before you plan around them. Nothing here predicts approval.
If your plan is rental income, ask a lender about conventional commercial mortgages instead.
Next: Business funding
Sources (read 2026-11-01): ISED guidelines, sections 2.2–2.3; SBA 504; SBA lending
What are the 50% and 3-year rules when a CSBFP loan buys a building I will occupy?
Yes, it can, within limits. The program's guidelines allow a term loan for buying or improving real property when the borrower owns, or will own, that property.
The maximum for all term loans is $1 million per borrower and related borrowers, and real property can use the full amount.
Two rules matter. Under the 50% rule, the borrower must use at least 50% of the land or building area for its business within 90 days after the final disbursement. Under the 3-year rule, the loan is not eligible if the borrower plans to sell, lease or sub-lease the operating area in the next three years, with limited exceptions for some industries.
Later improvements to the business area can be eligible. Farming businesses are excluded, and the lender decides on the loan, not the government.
Nothing here predicts approval. Ask a participating lender how the rules apply to your property.
Next: CSBFP frequently asked questions
Sources (read 2026-11-01): ISED guidelines, sections 2.2–2.3
How much of a CSBFP loan can go to goodwill and how should a business purchase price be allocated?
Partly. The Canada Small Business Financing Program guidelines allow term loans for assets bought as part of a going-concern purchase, but not for buying shares.
Since July 2022, eligible intangible assets include goodwill when it is part of a going-concern purchase. The total for equipment, leasehold improvements, intangible assets and working capital is capped at $500,000, and no more than $150,000 of that can be intangible assets and working capital costs. Real property can use the rest of the $1 million overall limit.
The purchase agreement should set out how the price is allocated among the assets, because each class is checked separately. A registration fee of 2% also applies.
Nothing here predicts approval. The lender decides, so share your draft agreement early and ask which assets it will treat as eligible.
Next: Canada funding resources
Sources (read 2026-11-01): ISED guidelines, sections 2.2–2.3
Can I use a Canadian government-backed loan to buy shares in a company?
No, not under the Canada Small Business Financing Program. The guidelines treat a share purchase as a loan to a shareholder, not to an eligible small business buying eligible assets, so it is not eligible.
That matters because many ownership transfers are set up as share deals. An asset deal, where the business's assets are bought, can be treated differently. The guidelines allow going-concern asset purchases, including goodwill, within set limits.
The structure also changes tax and legal results for buyer and seller. Those points need independent professional advice.
Nothing here predicts approval. Other lenders, such as banks or BDC, may have their own acquisition products with different rules.
Before you choose a structure, ask your lender how it would treat a share purchase versus an asset purchase, and ask your accountant and lawyer about the consequences.
Next: Canada funding resources
Related: How much of a CSBFP loan can go to goodwill and how should a business purchase price be allocated?
Sources (read 2026-11-01): ISED guidelines, sections 2.2–2.3
What are the maximum term and rate for a Canada Small Business Financing Program loan?
For term loans, the program sets a maximum government-coverage term of 15 years for all loan classes. The guidelines cap a floating rate at the lender's prime rate plus 3%, which includes the 1.25% annual administration fee.
A separate 2% registration fee applies to the amount disbursed. All or part of it may be financed within the loan limits.
Lines of credit are different. Their floating rate cap is prime plus 5% including the same administration fee. Fixed-rate rules also exist.
These are caps, not the rate you will get. Lenders set the actual rate within the rules, and the lender decides on the loan. Nothing here predicts approval.
Ask the lender for the written rate, fees and total cost, and check them against the guidelines.
Next: CSBFP frequently asked questions
Sources (read 2026-11-01): ISED guidelines, sections 2.2–2.3
Can a holding company borrow under the Canada Small Business Financing Program to buy property?
Generally not. The program's guidelines say a holding corporation that does not itself operate a business is not an eligible borrower. The asset it buys is owned by a separate legal entity from the operating business.
This is a common structure, because owners often hold property apart from the operating company. The guidelines also say a borrower that buys property only to rent it out is not eligible.
The rule points to the borrower, not the owner. The operating business itself may be able to borrow, and own the property, if it meets the real property rules such as the 50% use test.
The lender decides, and nothing here predicts approval. Tax and liability reasons for a separate property company need independent advice.
Before you set up the purchase, ask a participating lender which entity should borrow and own.
Next: Canada funding resources
Related: What are the 50% and 3-year rules when a CSBFP loan buys a building I will occupy?
Sources (read 2026-11-01): ISED guidelines, sections 2.2–2.3
What collateral and lender variations come with a commercial mortgage?
BDC describes a commercial mortgage as the usual way to buy or build commercial real estate. It is a term loan where the land and building are the collateral.
BDC says repayment generally runs 15 to 30 years, with monthly payments of principal and interest. If you cannot repay, the lender can take and sell the property to recover its money.
Rates, terms and conditions differ by financial institution. BDC notes that some banks lend a higher share of the property's value than others, so it suggests shopping around.
That describes the product, not a rate or approval for you. Lenders can also ask for an appraisal, a purchase offer, leases and an environmental report, depending on the deal.
Get written offers from more than one lender and compare cost, the share of value financed and the conditions.
Next: Canada funding resources
Sources (read 2026-11-01): BDC financing FAQ; financing types
What documents might a lender ask for when I buy a business or property?
Expect to give the lender the deal documents as well as your own financials. BDC's FAQ lists company financial statements, the purchase offer, a Phase I environmental report, an assessment report on asset or structure value, and a list of leases, depending on the loan.
The Canada Small Business Financing Program guidelines point to executed sales contracts for real property or going-concern purchases. For a going concern, the agreement should show how the price is split among assets such as equipment, goodwill and inventory.
SBA says a lender helps you determine your documents, which vary by loan size and lender process.
Requirements differ by lender, and these lists are examples. Nothing here predicts approval.
Ask your lender early for a written checklist, and ask your lawyer to check that the purchase agreement gives the lender what it needs.
Next: Business funding
Related: What collateral and lender variations come with a commercial mortgage?
Sources (read 2026-11-01): BDC financing FAQ; ISED guidelines, sections 2.2–2.3; SBA lending
What is seller financing when buying a business?
Seller financing means the person selling the business lets you pay part of the price over time instead of all at closing.
BDC describes it this way: the seller is often paid a percentage of the price in cash, and the buyer pays the rest, with interest, over a period of time. BDC lists it with senior debt, equity and mezzanine financing as one piece of an acquisition financing package.
It is a debt owed to the seller. It is not a grant, and the terms are set by contract. Interest, payment dates, security and what happens on default all need to be written down.
A lender may want to see the seller's terms, because they affect your cash flow. Valuation, tax and legal points matter here.
Get independent advice before agreeing, and ask your lender how a seller note fits its conditions.
Next: Business funding
Related: How can I finance buying a business or taking over from an owner?
Sources (read 2026-11-01): financing types
What is mezzanine financing in a business acquisition?
Mezzanine financing is a type of loan that sits behind senior debt. BDC says these loans generally are not secured by company assets and have very flexible repayment terms.
Because it ranks lower for repayment if the company defaults, it is riskier for the lender, so BDC says lenders charge higher interest on it. It can complement senior debt in an acquisition package.
BDC separately describes quasi-equity financing as a hybrid of debt and equity with flexible repayment, aimed at fast-growing companies with few assets to pledge.
Costs and conditions vary by provider, and nothing here predicts approval or terms.
If you are comparing it with other sources, add up total cost and any effect on your control of the company. Get independent financial and legal advice.
A next step is to ask a lender what mix of senior debt, seller financing and equity it expects.
Next: Business funding
Related: What is seller financing when buying a business?
Sources (read 2026-11-01): financing types
How much of my own money do I need to put into an acquisition or property purchase?
It depends on the lender and program, but expect to put some of your own money in. BDC says a buyer generally has to put money into an acquisition, which lowers the loan and shows commitment.
For SBA 504 real estate projects, SBA's lender guidance says a project typically includes a borrower contribution of at least 10% of total project cost. Lenders may require more, for example for special-purpose property.
For 7(a), SBA does not give one fixed contribution on its public loan page. Your lender decides what it needs based on credit, repayment ability and collateral.
Nothing here predicts approval or an exact down payment.
Get each lender's equity requirement in writing before you sign a purchase agreement. If you are buying with partners, work out who contributes what.
Next: Business funding
Sources (read 2026-11-01): financing types; SBA lenders: 7(a), CDC/504 and Microloan programs overview
What should I know before buying a franchise?
Read the franchise disclosure document before you sign or pay, and get advice on it. The FTC says you should receive the document at least 14 days before you sign any contract or pay the franchisor or an affiliate.
The FTC says the document has 23 numbered items, including costs, litigation history, territory limits, renewal and termination terms and financial statements. Any earnings claims must be in Item 19, so ask for written support.
The FTC also advises talking to current and former franchisees listed in Item 20, and not only those the franchisor picks. It suggests an accountant review the financial statements and a lawyer experienced in franchising review the contract.
The FTC page covers US rules, and Canadian provinces have their own. Financing a franchise purchase is a separate step with lenders.
Nothing here predicts approval for financing.
Next: United States funding resources
Sources (read 2026-11-01): A Consumer's Guide to Buying a Franchise
What should I check before buying an existing business?
Do your due diligence before you commit, and check the whole picture, not only the price. SBA's guide says to quantify your investment and look at what comes with the purchase. It suggests asking questions about contracts, leases, existing cash flow and inventory.
SBA also notes that buying an existing business usually gives you control, but you inherit what is there and may have little outside guidance. Its checklist includes your skills and how much you can spend to buy and manage the business.
Lenders will ask for related records, so organized financials and contracts help. Valuation, tax and legal points need independent advice, such as an accountant and a lawyer.
This is general information, not due diligence advice for your deal.
A next step is to list every contract, lease and cash flow item you want to see, and ask the seller for them in writing.
Next: Funding guides
Related: How can I finance buying a business or taking over from an owner?
Sources (read 2026-11-01): SBA: Buy an existing business or franchise (plan your business)
How is the purchase price of a business allocated for US tax purposes?
In a purchase of business assets, buyer and seller generally each file IRS Form 8594 to report how the price was split among asset classes.
The IRS instructions say both must file when assets making up a trade or business are transferred and the buyer's basis is set only by the price paid. Each attaches it to their income tax return. Like-kind exchange property is generally excluded.
The form uses a residual method with seven classes. Cash is Class I, inventory is Class IV, furniture, buildings, land and equipment are Class V, and goodwill is Class VII. An asset cannot be allocated more than its fair market value.
If the price changes later, the parties reallocate and file a supplemental form.
Tax results vary and depend on how the deal is structured. Get advice from a tax professional before you sign.
Next: IRS Form 8594 instructions
Related: What should I check before buying an existing business?
Sources (read 2026-11-01): Instructions for Form 8594, Asset Acquisition Statement
How do I find an SBA Certified Development Company for a 504 loan?
Use SBA's tool to find Certified Development Companies, or contact your local SBA office. SBA says 504 loans are available only through CDCs and that CDCs are certified and regulated by SBA.
SBA's 504 page links to a CDC locator and suggests contacting your local SBA office to make sure you are dealing with a qualified lender.
A CDC is a nonprofit community economic development partner. It works with a senior lender to put the project financing together. A CDC being a nonprofit does not make nonprofit organizations eligible borrowers, because SBA says 504 loans cannot go to nonprofit, passive or speculative businesses.
Nothing here predicts approval.
Before you call, have your project description, estimated cost and how you will use the property ready. Ask the CDC which senior lenders it works with and what each requires.
Next: SBA 504 loans
Related: How is a typical SBA 504 real estate project funded?
Sources (read 2026-11-01): SBA lenders: 7(a), CDC/504 and Microloan programs overview; SBA 504
Can a charity or nonprofit buy a building with an SBA loan?
Not directly. SBA's operating procedures say all applicants must be organized for profit, and non-profit businesses are not eligible for SBA business loan assistance. An ineligible business cannot obtain an SBA loan for any purpose, including buying or building a building for its own use.
The procedures do allow for-profit subsidiaries of a non-profit to be eligible if all other requirements are met. If the non-profit affiliate owns 20% or more of that for-profit business but cannot or will not guarantee the loan, the for-profit business is not eligible. The non-profit affiliate's receipts or employees are generally counted when the subsidiary's size is checked.
SBA's 7(a) page also lists operating for profit as an eligibility condition. This answer covers the US SBA programs as of 1 November 2026. Canadian programs and other US lenders such as community lenders were not reviewed. Speak with a lender or adviser before restructuring.
Next: United States funding resources
Related: Can I use government-backed financing to buy a building just to rent it out?
Sources (read 2026-11-01): SBA 7(a) terms, conditions and eligibility; SBA SOP 50 10 8.1 with Technical Updates, effective 1 Oct 2026 (7(a) and 504 lender procedures)
Do I need a Phase I environmental assessment to buy commercial property?
Often, but it depends on the lender and the property's risk. For SBA-backed loans, SBA requires an environmental investigation of all commercial property offered as security. The depth depends on risk. For a loan up to $250,000 it may start with a questionnaire. Above that it starts, at minimum, with a questionnaire and records search with risk assessment. If the result is anything other than low risk, a Phase I assessment is required. A Phase I is required from the start for environmentally sensitive industries and gas stations. Reports must be dated within one year of the SBA loan number.
Separately, EPA says a buyer who wants protection from CERCLA liability must carry out all appropriate inquiries, and ASTM E1527-21 Phase I satisfies that. It must be done or updated within one year before acquisition, with certain parts within 180 days.
Conventional lenders set their own rules. Canadian requirements were not reviewed. Ask your lender early, because assessments take time and cost money.
Next: United States funding resources
Related: What closing costs should I budget for a commercial purchase?
Sources (read 2026-11-01): EPA: All appropriate inquiries; SBA SOP 50 10 8.1 with Technical Updates, effective 1 Oct 2026 (7(a) and 504 lender procedures)
Can seller financing be refinanced after an SBA-backed business purchase?
Sometimes. Under SBA's 7(a) procedures, seller debt structured with a change of ownership is eligible to be refinanced after it has been in place and current for 36 months. That is a rule about timing, not a promise that a lender will refinance it.
Seller debt can also count toward the buyer's equity if it is subordinated to the lender and on full standby, meaning no principal or interest payments for the term of the 7(a) loan. So the seller note's terms at the start decide what you can do later. If the note requires payments from day one, it may not count as equity and the refinancing route may differ.
This is a US SBA 7(a) rule as of 1 November 2026. Canadian vendor financing works differently and is covered by the answers on seller financing in this cluster. Ask your lender how your planned note fits before you sign the purchase agreement.
Next: United States funding resources
Related: What is seller financing when buying a business?; Can seller financing count toward my equity in an SBA-backed purchase?
Sources (read 2026-11-01): SBA SOP 50 10 8.1 with Technical Updates, effective 1 Oct 2026 (7(a) and 504 lender procedures)
Do I pay land transfer tax when I buy commercial property in Ontario?
Yes, generally. Ontario's page says land transfer tax is payable on every conveyance of land tendered for registration unless an exemption applies, and its definition of land includes buildings and structures, with no carve-out for commercial property.
For non-residential property registered on or after 1 January 2017, the tiered rates on the page are 0.5% up to $55,000, 1.0% from $55,000 to $250,000, 1.5% from $250,000 to $400,000 and 2.0% above $400,000. The page refers to the transferee in connection with the tax, which suggests the buyer pays, but confirm with your lawyer. It does not mention Toronto's separate municipal tax, so check the City of Toronto if the property is there.
Other provinces and US states have their own transfer taxes, and none were reviewed here. Budget for the tax with the other closing costs and ask your lawyer for the exact figure.
Next: Canada funding resources
Related: What closing costs should I budget for a commercial purchase?
Sources (read 2026-11-01): Ontario: Calculating land transfer tax
How do I value a small business before buying it?
A valuator, ideally a chartered business valuator, usually does it, using one or more of three main methods. BDC describes them this way.
Earnings-based: for established businesses that earn reasonable returns and are worth more than their assets alone. The valuator reviews past results and forecast earnings or cash flow.
Market-based, or earnings multiple: applies a multiple to a measure such as EBITDA or revenue. The right multiple depends on the industry, company size, market conditions and what comparable businesses sold for.
Asset-based: used when value comes mainly from assets such as real estate, or when returns are poor or the business may be liquidated.
Different methods can give different figures. BDC says the valuation is only a guideline and the final price depends on factors such as the seller's eagerness, the buyer's strategic interests, financing and due diligence.
This is general information, not valuation advice. Lenders may require their own independent valuation.
Next: Business funding
Related: What is a business appraisal and who can perform one?; What should I check before buying an existing business?
Sources (read 2026-11-01): BDC: Business valuation (glossary)
What is an earn-out in a business sale?
An earn-out is part of the purchase price that depends on how the business performs after the sale. BDC describes it as a portion of a vendor note whose payments rise or fall with the EBITDA the company produces during the repayment period.
That makes it a form of seller financing. The buyer pays less if results fall short and more if they exceed expectations, so the seller shares some of the risk. BDC describes vendor notes in general as usually having few conditions and favourable interest costs.
The page does not cover how EBITDA is defined for an earn-out, the length of the period or dispute rules. Those must be written precisely in the purchase agreement, because both sides can read a vague formula differently. Lenders also have their own views on how a performance-based note is treated in the deal.
Get a lawyer and accountant to draft the formula. This is general information, not legal advice.
Next: Business funding
Related: What is seller financing when buying a business?
Sources (read 2026-11-01): BDC: How to finance a business acquisition
What types of business purchases can SBA 7(a) loans finance?
SBA's procedures sort change-of-ownership loans into four categories: Initial Acquisition, Business Expansion, Owner Buyout and ESOP and Cooperative. Initial Acquisition is the default. It covers a change that creates a new majority or largest owner who was not an owner before, or who has been employed by the business for fewer than 24 months.
Business Expansion is an existing business buying another. It must have operated at least two full fiscal years with the same owners, buy 100% of the other business and be in the same four-digit NAICS industry group. Owner Buyout changes the ownership structure among current owners or employees without acquiring another entity or asset. ESOP and Cooperative covers employee ownership plans and co-ops.
The lender must document why a deal fits a category other than Initial Acquisition. Each category has its own rules on equity, guarantees and valuation. This is the US SBA position as of 1 November 2026, so check current rules with a lender.
Next: United States funding resources
Related: Can an SBA 7(a) loan be used to buy a business or buy out a partner?; Can employees buy out the business owner with SBA financing?
Sources (read 2026-11-01): SBA SOP 50 10 8.1 with Technical Updates, effective 1 Oct 2026 (7(a) and 504 lender procedures)
Can an SBA loan fund bringing in a new partner or buying part of an owner's stake?
It can, as a 'partial change of ownership', with conditions. SBA's procedures allow loan proceeds to buy all or part of one or more owners' interests, but at least one original owner must remain an owner after the sale and personally guarantee the loan.
Both the operating company and any new owner, direct or indirect, who acquires an interest must be co-borrowers, no matter how small the stake. A new owner gaining even 1% must be a co-borrower. Indirect owners must also personally guarantee. A selling owner who stays on with less than 20% after the sale must give a full guaranty, with a term of at least two years after final disbursement.
Multi-step partial changes, where owners form a new entity to become the 100% owner, are not eligible. This is the US SBA 7(a) position as of 1 November 2026. Details such as equity and valuation differ by deal, so ask a lender early.
Next: United States funding resources
Related: Can an SBA 7(a) loan be used to buy a business or buy out a partner?; What types of business purchases can SBA 7(a) loans finance?
Sources (read 2026-11-01): SBA SOP 50 10 8.1 with Technical Updates, effective 1 Oct 2026 (7(a) and 504 lender procedures)
Can employees buy out the business owner with SBA financing?
Possibly. SBA's procedures allow an Existing Owner Buyout where current owners or current employees buy out another owner. The owners or employees must have actively participated in the business for at least the last 24 consecutive months, and the business and the buyers are co-borrowers. A single owner can also sell 100% to an individual employed by the business for at least 24 months before the application. Otherwise the deal is treated as an Initial Acquisition, with tighter credit standards.
The procedures also cover ESOP and Cooperative transactions. Loans to an ESOP to buy a controlling interest of at least 51% are not subject to SBA's equity injection requirement. If the seller stays on as a partial owner in an ESOP deal, the seller must give a full, unlimited guarantee.
This is the US SBA 7(a) position as of 1 November 2026. Canadian options were not reviewed. A lender and a transaction lawyer can say what fits your case.
Next: United States funding resources
Related: What types of business purchases can SBA 7(a) loans finance?; Can the seller stay involved after an SBA-financed sale of the business?
Sources (read 2026-11-01): SBA SOP 50 10 8.1 with Technical Updates, effective 1 Oct 2026 (7(a) and 504 lender procedures)
Can the seller stay involved after an SBA-financed sale of the business?
Yes, in many deals. SBA's procedures say the seller may stay on as an owner, officer, director, stockholder, key employee or employee of the business. Whether that fits your deal depends on the transaction type.
If the seller stays as a partial owner, rules for partial changes of ownership apply: at least one original owner must remain and guarantee, and a selling owner left with less than 20% must give a full guaranty for at least two years after final disbursement. In an ESOP deal where the seller remains a partial owner, the seller must give a full, unlimited guarantee.
A seller who stays also affects how the lender views the transition. Put the seller's role, pay and end date in writing, and keep it consistent with the purchase agreement and any non-compete.
This is the US SBA 7(a) position as of 1 November 2026. Ask your lender before signing anything.
Next: United States funding resources
Related: Can an SBA loan fund bringing in a new partner or buying part of an owner's stake?; What is a non-compete agreement in a business sale?
Sources (read 2026-11-01): SBA SOP 50 10 8.1 with Technical Updates, effective 1 Oct 2026 (7(a) and 504 lender procedures)
Will an SBA lender require a quality of earnings report when I buy a business?
For larger deals, yes. SBA's procedures say that for Business Expansion and Initial Acquisition deals where the purchase price is $3 million or more, the lender must obtain a Quality of Earnings report in addition to the business valuation. The threshold is measured before buyer equity, seller debt or other financing. Owner Buyout transactions have separate treatment, and a QoE is not required when buying an owner-occupied special purpose property.
SBA describes a QoE as an independent financial due diligence report on the reliability and accuracy of historical and projected earnings, prepared by an independent qualified professional for the benefit of the lender, and it must include a cash proof. The lender uses the findings to calculate debt service coverage and must reduce the loan if coverage does not support the valuation and debt structure.
Out-of-pocket costs of due diligence reports may be passed to the borrower. This is the US SBA position as of 1 November 2026.
Next: United States funding resources
Related: What is a business appraisal and who can perform one?; How much equity injection does SBA require for a change of ownership?
Sources (read 2026-11-01): SBA SOP 50 10 8.1 with Technical Updates, effective 1 Oct 2026 (7(a) and 504 lender procedures)
What is a business appraisal and who can perform one?
It is an independent opinion of what a business is worth. BDC says a valuator, ideally a chartered business valuator, usually performs it and may use earnings, market or asset methods.
For SBA 7(a) change-of-ownership loans, the valuation must be requested by and prepared for the lender, not for the buyer or seller. The individual must be a 'qualified source': someone who regularly receives compensation for business valuations, holds one of the listed accreditations (ASA, CBA, ABV, CVA or BCA) and is independent of the lender's loan production and approval. The scope must say whether the deal is an asset or stock purchase and what is included, and the report must give a conclusion of value and the valuator's qualifications.
For non-special-purpose property, if the purchase price is $350,000 or less, the lender may do its own valuation unless buyer and seller are closely related.
This combines BDC and SBA guidance as of 1 November 2026.
Next: Business funding
Related: How do I value a small business before buying it?; Will an SBA lender require a quality of earnings report when I buy a business?
Sources (read 2026-11-01): BDC: Business valuation (glossary); SBA SOP 50 10 8.1 with Technical Updates, effective 1 Oct 2026 (7(a) and 504 lender procedures)
Can seller financing count toward my equity in an SBA-backed purchase?
Yes, but only on strict terms. SBA's procedures say seller debt that is subordinated to the lender and on full standby, meaning no principal or interest payments for the term of the 7(a) loan, may be considered as equity. Standby debt generally must use SBA Form 155 or an equivalent, and the standby creditor cannot take an equity investment in the business.
Seller debt can supply no more than half of the required equity, as a limited source. Where the price is higher than the valuation and quality-of-earnings report support, extra funds that bridge the gap must be on full standby.
Lenders must also address repayment and standby terms when equity comes from borrowed funds such as seller financing beyond the minimum injection.
This is the US SBA 7(a) position as of 1 November 2026. Structure the seller note with your lender before signing the purchase agreement.
Next: United States funding resources
Related: What is seller financing when buying a business?; How much equity injection does SBA require for a change of ownership?; Can seller financing be refinanced after an SBA-backed business purchase?
Sources (read 2026-11-01): SBA SOP 50 10 8.1 with Technical Updates, effective 1 Oct 2026 (7(a) and 504 lender procedures)
Are there government grants to buy commercial property?
SBA says it does not provide grants for starting and expanding a business, and its page does not mention grants for buying property. The page says SBA's grants go to nonprofits, resource partners and educational organizations to support entrepreneurship through counselling and training.
That means buying a building with government help usually means a loan or a loan guarantee, not a grant. Loans and guarantees are not grants and must be repaid. Programs such as SBA 504 and 7(a) are loans made by lenders.
Be careful with anyone who promises a property grant for a fee. SBA says it contacts people only from email addresses ending in @sba.gov, and suspicious contact should be reported as fraud.
This covers the US SBA only as of 1 November 2026. Local economic development grants or tax incentives may exist in your area, and Canadian programs were not reviewed here.
Next: United States funding resources
Related: What does SBA 504 financing cover?; Can I use government-backed financing to buy a building just to rent it out?
Sources (read 2026-11-01): SBA: Grants
What is a letter of intent when buying a business?
A letter of intent confirms the buyer's interest and sets out the key elements of the deal. BDC says it guides the negotiations and can provide a period of exclusivity.
It is generally not fully binding and does not create an obligation to close. Specific provisions, usually confidentiality and exclusivity, can be made binding if the document says so. BDC warns that a detailed LOI can still carry legal weight if it starts to look like a formal offer.
Typical contents are a price range subject to due diligence, payment terms, an exclusivity period with stated penalties, due diligence steps, confidentiality, the buyer's right to withdraw, how transaction costs are shared and closing conditions. BDC notes costs can run from $10,000 to $100,000 or more.
The BDC article does not address non-compete clauses. Have a transactional lawyer review the LOI before you sign.
Next: Business funding
Related: What documents might a lender ask for when I buy a business or property?; What is a non-compete agreement in a business sale?
Sources (read 2026-11-01): BDC: Letter of intent for a business acquisition
How much equity injection does SBA require for a change of ownership?
The minimum is 10% for the SBA change-of-ownership categories, based on total project cost. SBA's procedures set Initial Acquisition at 10%, and that amount cannot be reduced or eliminated. Business Expansion, Owner Buyouts and ESOP and Cooperative transactions are also 10%, but for Business Expansion and Owner Buyouts the lender may reduce or eliminate it if the borrower has enough liquidity and working capital and did not have negative net worth at the last fiscal year-end. Owner Buyout equity is based on the purchase price. Loans to an ESOP for a 51% or greater controlling interest are exempt.
Unlimited sources include cash that is not borrowed. Some sources, such as seller debt on full standby, can cover no more than half. Real estate bought with the deal is subject to the same equity rules unless financed with a 504 loan, which has its own contribution rules.
This is the US SBA 7(a) position as of 1 November 2026. Your lender sets the final amount.
Next: United States funding resources
Related: How much of my own money do I need to put into an acquisition or property purchase?; Can seller financing count toward my equity in an SBA-backed purchase?
Sources (read 2026-11-01): SBA SOP 50 10 8.1 with Technical Updates, effective 1 Oct 2026 (7(a) and 504 lender procedures)
Does SBA require a personal guarantee when buying a business?
Yes, for owners of 20% or more. SBA's procedures require individuals who own 20% or more of the applicant, directly or indirectly, to provide an unlimited personal guaranty. The lender must obtain a personal financial statement from every individual guaranteeing the loan, dated within 90 days of approval. Entities that own 20% or more must also give an unlimited full guaranty.
The rule can reach people who own less. SBA may require other appropriate parties to give full or limited guaranties without regard to ownership, such as entities that manage day-to-day operations under a management agreement. A six-month lookback rule means someone who was subject to the guaranty requirement six months before the application stays subject to it even if their share falls below 20%.
ESOP transactions have a specific rule for sellers who stay on as partial owners.
This is the US SBA position as of 1 November 2026. Ask your lender who will need to sign.
Next: United States funding resources
Related: Do spouses, trusts or holding companies also have to guarantee an SBA loan?; Can an SBA loan fund bringing in a new partner or buying part of an owner's stake?
Sources (read 2026-11-01): SBA SOP 50 10 8.1 with Technical Updates, effective 1 Oct 2026 (7(a) and 504 lender procedures)
Do spouses, trusts or holding companies also have to guarantee an SBA loan?
Sometimes. SBA's procedures say each spouse owning less than 20% must personally guarantee the loan in full when the combined ownership of both spouses and minor children is 20% or more. A non-owner spouse is generally asked to sign collateral documents but not the personal financial statement, and that spouse's guaranty on jointly held collateral is limited to the spouse's interest in it.
When trusts own 20% or more in total, each trust must give an unlimited full guaranty, executed by the trustee, and the trustor must also personally guarantee. All donors to the trust are treated as trustors for eligibility purposes. Any entity with direct or indirect ownership of 20% or more must provide an unlimited full guaranty, and the lender must obtain its financial statements.
A corporate or trust structure does not remove the guaranty. This is the US SBA position as of 1 November 2026. Ask a lender and a lawyer before setting up the buying entity.
Next: United States funding resources
Related: Does SBA require a personal guarantee when buying a business?
Sources (read 2026-11-01): SBA SOP 50 10 8.1 with Technical Updates, effective 1 Oct 2026 (7(a) and 504 lender procedures)
What property appraisal will a commercial lender require?
It depends on the lender, but SBA-backed loans have specific rules. SBA's procedures require an independent real estate appraisal that meets SBA requirements in some cases, and the appraisal requirement cannot be delayed until loan closing. For 7(a), the appraisal must also give the liquidation value of the real estate.
For 504 projects, appraisals are not required at application, but they must be dated within 12 months of the application approval and be in hand before closing. For collateral, improved real estate is generally counted at 85% of fair market value determined under the appraisal rules.
Where a business purchase includes real estate, the business valuation does not replace the property appraisal.
Out-of-pocket costs such as collateral appraisals can be charged to the applicant, so budget for them. This is the SBA position as of 1 November 2026. Conventional lenders and Canadian lenders set their own appraisal rules, which were not reviewed here.
Next: United States funding resources
Related: What closing costs should I budget for a commercial purchase?; Do I need a Phase I environmental assessment to buy commercial property?
Sources (read 2026-11-01): SBA SOP 50 10 8.1 with Technical Updates, effective 1 Oct 2026 (7(a) and 504 lender procedures)
What closing costs should I budget for a commercial purchase?
Plan for more than the price and your down payment. Under SBA rules a lender may collect necessary out-of-pocket expenses from the applicant, such as filing and recording fees, photocopying and delivery charges, collateral appraisals, environmental investigation reports and other direct closing charges. They must be itemized and kept in the loan file. Fees for legal services must come from a licensed attorney or someone working under one.
For 504 projects, SBA's procedures describe CDC fees, including a processing fee and a monthly servicing fee, and a one-time fee from the third-party lender in a senior lien position.
In a business purchase, BDC notes transaction costs can range from $10,000 to $100,000 or more. Land transfer tax may also apply, for example in Ontario. Exact amounts depend on the deal, so none are stated here.
Ask your lender for a written fee schedule and your lawyer for a closing statement estimate.
Next: Business funding
Related: Do I need a Phase I environmental assessment to buy commercial property?; Do I pay land transfer tax when I buy commercial property in Ontario?; What property appraisal will a commercial lender require?
Sources (read 2026-11-01): BDC: Letter of intent for a business acquisition; SBA SOP 50 10 8.1 with Technical Updates, effective 1 Oct 2026 (7(a) and 504 lender procedures)
Can I finance commercial construction instead of buying existing property?
Yes in some programs. SBA's 504 page lists buying, building or renovating buildings or land among eligible uses. For 7(a), SBA's procedures allow loan proceeds to purchase or improve real estate, with occupancy rules: for new construction the applicant must occupy 60% of the rentable property, may permanently lease up to 20% to a third party, and may temporarily lease another 20% with a plan to use it within 3 years and all of it within 10 years.
For 504, the CDC must describe how interest payments and operations will be covered during construction.
New businesses on 504 projects must contribute at least 15% rather than 10%. Construction raises other costs such as environmental checks and appraisals.
This covers US SBA programs as of 1 November 2026. Canadian programs and construction-specific bank loans were not reviewed. Ask a lender about construction financing and how it converts to permanent financing.
Next: United States funding resources
Related: How is a typical SBA 504 real estate project funded?; How much of a building must my business occupy for an SBA 7(a) loan?
Sources (read 2026-11-01): SBA: 504 loans; SBA SOP 50 10 8.1 with Technical Updates, effective 1 Oct 2026 (7(a) and 504 lender procedures)
How much of a building must my business occupy for an SBA 7(a) loan?
For an existing building, the applicant must occupy at least 51% of the rentable property and may lease up to 49% to a third party. SBA's procedures set this for loans used to purchase or improve real estate, or to refinance real estate debt.
For new construction, the applicant must occupy 60% of the rentable property. It may permanently lease up to 20% to a third party and temporarily lease another 20%, with the intention of using some of that extra space within 3 years and all of it within 10 years.
When an eligible passive company owns the real estate and leases it to the operating company, the property company must lease 100% of the rentable property to the eligible operating company. A business that cannot meet the occupancy test is not a candidate for these loans to buy the building.
This is the US SBA 7(a) position as of 1 November 2026. 504 and Canadian programs have their own rules. Check with a lender before making an offer.
Next: United States funding resources
Related: Can I use government-backed financing to buy a building just to rent it out?; Can I finance commercial construction instead of buying existing property?
Sources (read 2026-11-01): SBA SOP 50 10 8.1 with Technical Updates, effective 1 Oct 2026 (7(a) and 504 lender procedures)
Do I pay property transfer tax when I buy commercial property in British Columbia?
Yes, in most cases. BC's page says that when you buy or gain an interest in property registered at the Land Title Office, you or your legal professional must file a property transfer tax return and pay the tax, unless an exemption applies.
The tax is based on the fair market value of the land and improvements on the day the transfer is registered. As read on 1 Nov 2026, the general rate is 1% on the first $200,000, 2% on the portion from $200,000 to $2,000,000, and 3% above $2,000,000. There is also a further 2% on residential property above $3,000,000.
Other taxes and additional rules apply to foreign nationals and certain trusts.
Transactions include fee simple purchases, leases and agreements for sale. Your lawyer or notary usually files the return, so ask for the figure early and include it in your closing budget. Rates and exemptions change, so check the page.
Next: Canada funding resources
Related: Do I pay land transfer tax when I buy commercial property in Ontario?; What closing costs should I budget for a commercial purchase?
Sources (read 2026-11-01): British Columbia property transfer tax
If I buy a commercial building in Canada, can I claim depreciation on the land too?
No. CRA states that land is not depreciable property, so only the building's cost is included for capital cost allowance, and land additions are reported separately.
CRA's classes page says most buildings fall in Class 1 with a 4% rate unless you elect a separate class. Some eligible non-residential buildings can get an additional allowance, for a total of 6% or 10%.
This is why the purchase price of a property is usually split between land and building, and the split can affect your claim. Ask your accountant how to support the allocation, for example with an appraisal.
Rules on rates and elections change, and other limits can apply, such as when the property is used or bought. This answer is general information from CRA's page as read on 1 Nov 2026, not tax advice.
Next: Canada funding resources
Related: How is the goodwill I pay for in a Canadian business purchase treated for tax?; What closing costs should I budget for a commercial purchase?
Sources (read 2026-11-01): CRA: Classes of depreciable property
Do I need to check zoning before I buy or lease property for my business?
Yes, check it first. SBA's business guide says that if you buy, rent, build or plan to work out of a physical property, you should make sure it conforms to local zoning requirements.
SBA explains that neighborhoods are generally zoned for commercial or residential use, and the rules can limit what your business may do there. It also says your location decides the taxes, zoning laws and regulations your business is subject to.
So before you commit, ask the local planning or zoning office in writing whether your intended use is allowed at that address, and whether any permits, signs, parking or hours limits apply.
A lender may also ask for this. Do not rely on the seller's or agent's word alone.
This is US-focused information from SBA. In Canada, municipalities set zoning, so check your local planning office. This is not legal advice.
Next: Business funding
Related: Do I need a Phase I environmental assessment to buy commercial property?; What documents might a lender ask for when I buy a business or property?
Sources (read 2026-11-01): SBA: Pick your business location (zoning ordinances)
Which closing costs can I add to my cost basis when I buy commercial property?
Under IRS Publication 551, your basis in property you buy includes settlement fees and closing costs that you would pay even if you bought for cash. The IRS lists examples such as abstract fees, legal fees including title search and preparation of the sales contract and deed, recording fees, surveys, transfer taxes and owner's title insurance, and certain amounts you agree to pay for the seller.
Costs of getting a loan are not included, such as points, mortgage insurance premiums, loan assumption fees, credit reports and lender-required appraisal fees. For business property, some loan costs are capitalised and deducted over the loan period.
Amounts placed in escrow for future taxes and insurance are not settlement costs.
Basis affects depreciation and gain on sale. This describes the IRS publication read on 1 Nov 2026, and your situation may differ. Ask a tax professional, and keep the closing statement.
Next: US funding resources
Related: What closing costs should I budget for a commercial purchase?; How is the purchase price of a business allocated for US tax purposes?
Sources (read 2026-11-01): IRS Publication 551 Basis of Assets
Can a startup buy property with a loan?
It can be harder and usually needs more of your own money. SBA treats a business as a start-up for equity purposes if it has operated, generating revenue from its intended operations, for one year or less. All 7(a) loans to a start-up require a 10% equity injection based on project cost.
For 504 real estate projects, SBA's procedures say new businesses must contribute at least 15%, and the debenture finances no more than 35% of the project. A project with a limited or special-purpose property adds to the contribution, and a new business with that kind of property must contribute at least 20%.
These are SBA minimums. Lenders can ask for more and decide on repayment ability and collateral. Nothing here predicts approval.
This covers US SBA programs as of 1 November 2026. Canadian options such as the Canada Small Business Financing Program have their own start-up rules, covered in other answers.
Next: United States funding resources
Related: How much of my own money do I need to put into an acquisition or property purchase?; How much equity injection does SBA require for a change of ownership?
Sources (read 2026-11-01): SBA SOP 50 10 8.1 with Technical Updates, effective 1 Oct 2026 (7(a) and 504 lender procedures)
When I buy a business in Ontario, do the employees' years of service carry over?
Yes, if the buyer hires them. Ontario's guide to the Employment Standards Act says that when there is a sale of a business and an employee of the seller is hired by the purchaser, the employee's length of employment with the seller is attributed to the purchaser. They do not start as a new employee.
The new owner must give credit for past service for any rights based on length of employment. The guide gives an example of an employee with 10 years of service whose notice entitlement and vacation are calculated using those years if the new owner later ends the job.
The guide covers sales of the whole business or a part of it, such as a division.
This is only the statutory minimum. Contracts, collective agreements and common law rights may add more, and the rules differ outside Ontario. Include employee costs in your offer and ask a lawyer about your deal.
Next: Canada funding resources
Related: What should I check before buying an existing business?; What is a non-compete agreement in a business sale?
Sources (read 2026-11-01): Ontario: Your guide to the Employment Standards Act, continuity of employment
What is a non-compete agreement in a business sale?
It is a promise by the seller not to compete with the business they sold, for a set time and area. The page I read does not define it, but it shows how the main US federal rule treated it. The FTC's Non-Compete Rule did not apply to non-compete clauses entered into as part of a bona fide sale of a business, of a person's ownership interest, or of all or substantially all of its operating assets.
The FTC page says that rule is not in effect and not enforceable. A court order in August 2024 stopped enforcement, and the FTC took steps to dismiss its appeal in September 2025. A February 2026 Federal Register notice is titled as a removal of the rule.
So enforceability turns mainly on state or provincial law, which was not reviewed here. Have a lawyer in the relevant jurisdiction draft it, and make sure the term, area and consideration are reasonable. BDC's letter-of-intent article does not address non-competes.
Next: Business funding
Related: What is a letter of intent when buying a business?; Can the seller stay involved after an SBA-financed sale of the business?
Sources (read 2026-11-01): FTC: Non-Compete Rule
How is the goodwill I pay for in a Canadian business purchase treated for tax?
CRA treats goodwill as depreciable property in Class 14.1. Its classes page lists property that is goodwill in that class, with a 5% capital cost allowance rate on a declining-balance basis for property acquired after 2016. Class 14.1 property acquired before 2017 uses 7% for tax years ending before 2027.
That means the amount you pay above the value of identifiable assets, if it is goodwill, is generally claimed gradually, not deducted at once.
How your purchase price is allocated among land, buildings, equipment, inventory and goodwill matters, and so does whether you buy assets or shares. Share purchases are treated differently, which this answer does not cover.
Ask an accountant to review the allocation before you sign, and keep the purchase agreement. This is general information from CRA's page as read on 1 Nov 2026, not tax advice.
Next: Canada funding resources
Related: If I buy a commercial building in Canada, can I claim depreciation on the land too?; How is the purchase price of a business allocated for US tax purposes?
Sources (read 2026-11-01): CRA: Classes of depreciable property
What CELER is and is not. celerfunding.com is operated by Celer Merchants Corporation. We are not a lender, grantmaker, government agency, investment portal or licensed adviser, and we are not an official partner of the programs mentioned here. This page is general information, not legal, tax, investment or credit advice. A CELER enquiry is not an official grant or loan application.