Acquisition Financing – SBA vs. Conventional Lending

Financing is a critical decision in the independent sponsor and search fund acquisition journey. The choice often comes down to SBA loans vs. conventional lending (we won't dive into the emerging private credit market here). This decision impacts everything from deal structure and cash flow management to long-term scalability and equity retention.

In the latest edition of Search Fund Operate, I break down:

-The pros and cons of each financing option

-How capital structuring is affected

-What entrepreneurs must consider when funding an acquisition

We find that:

- SBA loans offer accessibility, lower down payments, and flexibility, making them ideal for first-time search funders.

- Conventional loans require more financial discipline but provide stronger banking relationships, higher loan limits, and better equity retention for long-term growth.

- What financing strategies have worked best in your acquisitions? Let’s discuss in the comments!

Read the full new edition here.