How To Cover The Supporting Costs Of Your Acquisition In Your SBA Loan

Team Acquira
-  March 20, 2023
What You’ll Learn
  • Common types of loans used to acquire a business
  • Typical and sometimes unexpected costs associated with buying a business
  • How to cover these costs and growth initiatives depending on the type of loan you receive
  • How to include growth initiatives in the supporting costs of a business acquisition loan

Whether you're acquiring a business or seeking to fund growth initiatives in a business, securing financing is a crucial step in achieving your goals – but understanding how to use the loan funds to cover supporting costs and drive growth can be a challenge.

More people are turning to business acquisition to pursue financial independence every day. This trend is being spurred by the so-called “Silver Tsunami,” which is the demographic shift in the United States and other developed countries as the baby boomer generation reaches retirement age. 

According to the 2019 Small Business Administration (SBA) Small Business Profile, there were approximately 2.4 million small businesses owned by Baby Boomers in the United States in 2018. This means 45.8% of all small businesses are owned by Baby Boomers.

Small businesses remain a cornerstone of the American economy, and this demographic shift risks many jobs. As entrepreneurs looking for financial freedom become increasingly aware of this situation's opportunity, many are looking to acquire a business of their own.

Acquira's Accelerator Program is an intensive and comprehensive program that will teach you everything you need to know about acquiring a business. 

Even with that in-depth training, acquiring a business takes time and money. While it may seem as simple as going to a business listing website to find a suitable purchase, the endeavor's actual process and cost can be much more than expected.

Numerous supporting costs go into an acquisition, everything from Quality of Earnings analysis to post-acquisition growth initiatives. Fortunately, there are ways to help cover these expenses depending on the type of loan you receive. 

In this article, we will break down many typical and unexpected expenses during a business acquisition and how to cover those costs with your SBA loan.

acquisition loans small business

Regular and Unexpected Acquisition Costs

Acquiring a small business can be a complex process. There are many costs beyond the purchase price of the business and many unexpected expenses that will also crop up. Here, we'll provide a list of those costs and how much you can expect to pay for them when working with Acquira. Please note, however, that these costs can be the same and sometimes significantly higher when working without Acquira.

Here are some examples of costs you can expect to incur, as well as some unexpected expenses that could arise during a small business acquisition:

  1. Legal Fees: Acquiring a business often involves significant legal work, including drafting and reviewing contracts, agreements, and other legal documents. Legal fees can add up quickly and may be more than anticipated. Acquira has legal service providers that provide services for a fixed fee of $20,000. If you decide not to work with Acquira or a fixed fee provider, that number often exceeds $50,000.
  2. Due Diligence Costs: Conducting due diligence on a business can involve expenses such as hiring accountants, attorneys, or other experts to review the financials, operations, and legal structure of the business. These costs can vary widely depending on the complexity of the business and the scope of the due diligence. However, we suggest that people budget at least $15,000 for financial due diligence.
  3. Working Capital: This is the amount of money required to keep the business operating after the acquisition, including inventory, accounts receivable, and other expenses. You are likely to acquire some working capital as part of the purchase, but you may want to have access to more. The amount of working capital required will depend on the specific circumstances of the acquisition and the needs of the acquired company.
  4. Capital Expenditures: These are costs associated with upgrading or expanding the business's physical assets, such as machinery or equipment. The amount of capex required will depend on the specific circumstances of the acquisition and the needs of the acquired company.
  5. Environmental assessments: Depending on the type of business and the property it occupies, environmental assessments may be required to determine any environmental risks or liabilities associated with the business. According to an Environmental Protection Agency (EPA) report, Phase I ESAs (Environmental Site Assessments) typically range from $1,800 to $4,600.
  6. Financing Costs: There may be costs associated with obtaining financing for the acquisition, such as loan origination fees or other closing costs. Your local bank typically charges a $5,000 fee to cover underwriting once you've signed a term sheet. This is usually your only out-of-pocket up-front expense – the SBA Guarantee fee of 2.6% is added to your loan.
  7. Growth initiatives: Implementing growth initiatives at a recently acquired business can help a new owner increase revenue, improve profitability, scale the business, stay competitive, and attract investors. Acquira's ACE Framework is one example of a growth initiative many partners implement after acquiring a business. The ACE Framework costs $150,000, with an initial down payment of $75,000. We recommend you put at least the $75,000 down payment in as a supporting cost.

It's important to be aware of these costs and to build them into the budget for the deal. Conducting thorough due diligence and working with experienced professionals can help minimize unexpected costs and ensure a successful business acquisition. If you'd like to learn how Acquira can help throughout this process, fill out the form below.

The SBA Loan

Several types of loans are commonly used to finance the acquisition of a business, but in this article, we're going to focus our attention on the SBA. The Small Business Administration's 7(a) loan program is a popular option for business acquisitions. These loans can provide up to $5 million in funding and be used for various purposes, including business acquisition.

Regarding the supporting costs of a business acquisition, the SBA loan can cover various expenses, including associated legal, accounting, and valuation fees. These expenses can be significant, so it's important to factor them into the overall cost of the acquisition when determining how much funding you need from the SBA loan.

The Process

how to get a loan to buy a business

To apply for an SBA 7(a) loan that includes funds to cover the supporting costs of an acquisition, you will need to apply to an SBA-approved lender.

You will use the “Settlement Sheet (Use of Proceeds Certification)” to cover the supporting costs of an acquisition with the SBA. This section of the application can be crucial to ensuring you have the funding you need.

Here are the general steps you should follow to apply to cover your supporting costs:

  1. Determine the total amount of funding you need: Calculate the amount of funding you need to cover the purchase price of the business and any supporting costs, such as legal fees, due diligence expenses, consultant fees, the SBA's insurance fees, or growth initiatives.
  2. Identify potential lenders: Research SBA-approved lenders that offer 7(a) loans and identify those with experience financing business acquisitions.
  3. Gather your financial documents: You must provide financial statements, tax returns, and other documentation to support your loan application. Be sure to gather all necessary documents in advance.
  4. Submit your application: Complete and submit the loan application to your chosen lender. Be sure to indicate that you are also seeking funds to cover the supporting costs of a business acquisition.
  5. Provide additional information: Your lender may request additional information or documentation to support your loan application. Be prepared to provide this information promptly to avoid delays in the loan approval process.
  6. Wait for a decision: The lender will review your loan application and decide whether to approve the loan. If approved, you will receive the funds and can use them to cover the supporting costs of the acquisition.

Remember that the application process and requirements for an SBA 7(a) loan may vary depending on the lender and the specific circumstances of the loan. Working closely with your lender and other professionals involved in the acquisition process is important to ensure a successful outcome.

Generally, the SBA loan's Use of Proceeds section outlines how the funds can be used and includes specific requirements for spending the loan funds. This section can be broken down into two categories: allowable and prohibited.

Allowable uses for an SBA loan include:

  1. Business acquisition: Using the loan funds to purchase an existing business, including intangible assets like goodwill, trademarks, and patents.
  2. Working capital: Funding the day-to-day operations of the business, including salaries, rent, utilities, and other expenses.
  3. Refinancing existing debt: Paying off high-interest debt with lower-interest SBA loan funds.
  4. Purchase of inventory: Using the loan to purchase inventory needed to operate the business.
  5. Purchase of equipment: Using the loan to purchase equipment needed to operate the business.
  6. Insurance: The SBA also allows you to roll your SBA insurance costs into the loan.
Covering The Cost Of a Change Management Consultant

Acquira offers a change management solution through our ACE Framework. A change management consultant can help improve working capital by assessing the current processes and systems in place, identifying inefficiencies or areas for improvement, and implementing changes that can result in cost savings and increased cash flow. Here are some specific ways a change management consultant might help:

1. Building Leadership: An ACE consultant will oversee the creation of a Leadership to help facilitate the transition from an owner-operated business to a management-run company.

2. Streamlining Processes: A consultant can review the most important business processes and identify areas of waste, redundancy, or inefficiency. They will then lead a review of those processes, allowing the leadership team to increase productivity, reduce errors, and reduce the time and cost associated with completing tasks.

3. Cost Reduction: A consultant can help identify cost reduction opportunities, such as reducing inventory levels or negotiating better pricing with suppliers. The business can increase cash flow and improve working capital by reducing costs.

4. Improving Cash Management: A consultant can help the business improve its cash management
processes, such as developing better accounts receivable and accounts payable procedures and creating a cash flow forecast. This can help the business identify cash shortages and surpluses and take steps to manage them more effectively.

5. Strategic Planning: A consultant can work with the business to develop a strategic plan that aligns with the business's overall goals. This can help ensure that the business is focused on its most important objectives and is allocating resources effectively to achieve them.

By improving processes, reducing costs, managing cash more effectively, and developing a strategic plan, a change management consultant can help a business improve its working capital and overall financial performance.

Prohibited uses for an SBA loan include:

  1. Paying off delinquent taxes.
  2. Financing investments or speculation.
  3. Making payments to a company owner or their affiliates, except for reasonable service compensation.
  4. Financing payments to shareholders, except for dividends to common shareholders.
  5. Repaying loans to an owner or affiliate of the company.

It's important to note that the Use of Proceeds section can vary depending on the specific type of SBA loan you are applying for, so it's always best to review the specific requirements before applying for the loan.


The timeline for receiving an SBA loan can vary depending on several factors, such as the complexity of the loan application, the lender's underwriting process, and the availability of SBA funds. The SBA loan process can take several weeks to several months to complete.

Typically, the borrower will work with the lender to complete the loan application and provide all necessary documentation, such as financial statements, tax returns, and business plans. Once the lender receives all the required documentation, they will review the application and underwrite the loan.

If the loan is approved, you must sign the loan agreement and meet any other requirements specified by the lender or the SBA. The loan funds will typically be disbursed to you shortly after signing the loan agreement. This typically happens within 30 days of receiving a commitment letter from the bank, but the exact timing will depend on the lender's policies and procedures.

Note: Regarding the reimbursement of expenses, it's important to note that the borrower should not assume that they will be reimbursed for any expenses until they have received confirmation from the lender and the SBA that the loan has been approved and the funds have been disbursed.

Once you have received the funds, you use that cash to reimburse yourself. So, as long as a deal closes, this is effectively a repayment of a personal loan you made to the new company.


There are always costs that are incurred during the business buying process. There are also unexpected expenses that can pop up during the process that can be a death knell for a deal if you cannot cover them.

Fortunately, it is possible to cover these supporting costs – both expected and unexpected. Of course, the ability to cover these costs through the terms of your loan is not guaranteed, and you should work with qualified advisors throughout the process to help increase your odds of success. 

This is what Acquira was built to do – help people acquire businesses. Our services include: 

Accelerator Program: Designed to teach you everything you need to know about buying a business and help you close on one in half the time, at half the cost of doing it on your own.

Success Coaching: Built to help you get your deal across the finish line. We provide a level of support that none of our competitors can match, including an individual success coach and deal-specific guidance to ensure you buy the perfect business for your needs.

Quality of Earnings Service: Acquira's QoE offering will evaluate the sustainability and reliability of a company's reported earnings. It involves thoroughly reviewing a company's financial statements and related disclosures to assess the quality and accuracy of the reported earnings and ensure you buy a healthy business.

ACE Framework: Our change management system will provide the tools to bring an owner-run operation to a management-led company in less than a year.

Acquira Capital: Acquira's equity fund was created to help high-performing Acquisition Entrepreneurs with the capital necessary to make a downpayment on a business.

If you're interested in these services, please fill out the form below to speak with an Acquira representative.

Key Takeaways

  • The supporting costs of an acquisition can vary widely and are often unexpected expenses.
  • It is possible to cover these supporting costs under the terms of your loan.
  • Change management services can be included in supporting costs because they help improve working capital.
  • Every deal is different, and you should consult qualified professionals when dealing with these loan terms.
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