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Key takeaways
- Fund purchase costs, working capital, reserves, and necessary investment together.
- SBA 7(a), SBA 504, and HUD Section 232 serve different purposes.
- Use the rules applicable to the approval date and an actual lender term sheet.
Start with the total project
List the purchase consideration, transaction fees, working capital, deposits, immediate improvements, and reserves. Identify the proposed equity, lender funds, seller financing, and other sources. Match timing: a source available after closing cannot fund a payment due at closing without an appropriate arrangement.
| Financing path | Potential fit | What must be checked |
|---|---|---|
| SBA 7(a) | Eligible business acquisition and permitted related uses | Borrower/business eligibility, structure, contribution, underwriting |
| SBA 504 | Eligible fixed assets | Property, use, occupancy, borrower and project requirements |
| HUD Section 232 | Eligible residential-care facilities | Facility, operator, property and lender underwriting |
| Conventional lender | Business, property or combined funding | Cash flow, collateral, guarantees, covenants and risk |
| Seller financing | Agreed portion of consideration | Subordination, payment terms, lender and program conditions |
(Sources: SBA and HUD, 2026)
Test cash flow after the purchase
Use normalized management and rent expenses, realistic collections, necessary maintenance, and the actual loan terms. Review the downside case: fewer service hours, lower occupancy, slower collections, higher payroll, or an interest-rate change. Identify the additional cash the buyer would need and when.
Check the applicable SBA rules
SBA's lender page lists SOP 50 10 8.1 with an October 1, 2026 effective date. That is future-effective relative to this article's September review. The lender must use the applicable SOP and intervening notices for the relevant approval date. Avoid treating a general online summary as the complete current requirements. (Source: SBA, 2026)
Understand the property program
HUD Section 232 provides mortgage insurance for qualifying residential-care facilities through approved lenders. Facility size, services, ownership, property condition, operator capability, and other criteria can matter. A very small residential home should not assume eligibility from the word “care.” (Source: HUD, 2026)
Compare term sheets on the same basis
Review interest structure, amortization, maturity, fees, reserves, guarantees, covenants, prepayment, and conditions. A lower initial payment can coexist with a balloon or rate-reset risk. The loan payment calculator is arithmetic only; enter actual terms and separately assess excluded costs.
Coordinate approvals and funding
The lender's willingness to finance does not establish authority to operate or bill. Connect financing conditions to licensing, enrollment, property use, insurance, and transition requirements before scheduling closing.
Frequently asked questions
What is the maximum SBA 7(a) loan?
SBA's program page states a maximum of $5 million. That is a program limit, not a commitment or a statement that every acquisition qualifies.
Is SBA 504 a goodwill loan?
It is a fixed-asset program with specific eligibility and use requirements. Do not assume it funds goodwill or general working capital in a business acquisition.
Is HUD 232 suitable for an agency with a rented office?
HUD 232 concerns eligible residential-care facility mortgages. A home care agency acquisition is a different financing problem.
Can a seller note replace all required buyer cash?
Do not assume so. Treatment depends on the lender, program, structure, standby requirements, and current applicable rules.
Sources
Sources are dated to distinguish current guidance from earlier publications. They support the identified facts; the transaction questions and examples are educational analysis.
- SBA: 7(a) loans (2026). Retrieved September 5, 2026.
- SBA: 504 loans (2026). Retrieved September 5, 2026.
- SBA: lender guidance and SOP updates (2026). Retrieved September 5, 2026.
- HUD: Office of Residential Care Facilities (2026). Retrieved September 5, 2026.
- HUD: healthcare programs (2026). Retrieved September 5, 2026.