Business Acquisition Financing with an LOI: How to Secure Lender Commitment

Signing a Letter of Intent (LOI) is a major milestone in a business acquisition, but it is not the finish line. For buyers planning to use SBA 7(a) financing, the LOI marks the point where lender scrutiny begins in earnest.

At this stage, lenders are no longer evaluating a hypothetical deal. They are assessing a specific transaction, a defined buyer, and a real operating business. How the deal is presented after LOI often determines whether financing moves forward smoothly or stalls during underwriting.

At Pioneer Capital Advisory, we work with buyers nationwide to guide this exact phase of the process. From LOI through closing, our role is to help position the acquisition so lenders can confidently issue a financing commitment.

Why the LOI Matters to SBA Lenders

From an SBA lender’s perspective, the LOI provides the framework for underwriting. It outlines the purchase price, structure, assets included, seller financing (if any), and anticipated closing timeline.

While an LOI is typically non-binding, lenders rely on it to confirm that the proposed transaction aligns with SBA eligibility and credit standards. Material changes later in the process can create delays or force lenders to re-underwrite the deal.

For this reason, lenders generally expect the LOI to be realistic, internally consistent, and aligned with SBA requirements regarding eligible uses of proceeds, ownership structure, and cash flow support.

What Lenders Evaluate After an LOI Is Signed

Once an LOI is in place, SBA lenders focus on four core areas.

First is the business being acquired. Lenders review historical financial performance, revenue stability, customer concentration, and industry risk. They want to see that the business can support debt service on a go-forward basis.

Second is the buyer. Lenders evaluate management experience, industry familiarity, and overall ability to operate the business successfully. This does not require identical experience, but lenders do expect a credible operating plan.

Third is deal structure. Asset purchases, stock purchases, seller notes, and earnouts all carry different underwriting implications. Certain structures may require additional documentation or lender approvals.

Fourth is repayment ability. Cash flow analysis, including projected debt service coverage ratio (DSCR), is central to SBA underwriting. While thresholds may vary by lender, the business must reasonably demonstrate the ability to service the proposed debt.

What “Lender Commitment” Really Means in SBA Financing

Buyers often ask when financing is considered “approved.” In SBA lending, commitment typically occurs in stages.

Early in the process, a lender may issue a preliminary indication of interest based on high-level review. This is not a guarantee of approval.

A true lender commitment usually comes in the form of a signed term sheet or commitment letter, subject to SBA authorization and completion of underwriting conditions. Even then, final approval is contingent on documentation, third-party reports, and SBA eligibility confirmation.

Understanding this distinction helps buyers set realistic expectations and avoid assuming financing is secured too early.

How to Position Your Deal for Lender Commitment

The most successful acquisitions are those that are clearly packaged and thoughtfully presented.

A strong lender presentation typically includes a clear summary of the transaction, buyer background, business overview, sources and uses of funds, and forward-looking cash flow analysis. The goal is not to oversell the deal, but to make it easy for a lender to understand and underwrite.

Equity injection is another key consideration. While SBA guidelines establish minimum equity requirements, lenders evaluate both the source and structure of buyer equity. Seller financing may strengthen a deal when properly structured, but it must align with SBA rules and lender policy.

Finally, proactive communication matters. Anticipating lender questions and addressing them early can significantly reduce back-and-forth during underwriting.

Common Mistakes Buyers Make After Signing an LOI

One common issue is treating financing as an afterthought once the LOI is signed. Delays often occur when buyers begin gathering documentation too late or underestimate lender requirements.

Another frequent challenge is misalignment between the LOI and SBA financing realities. Purchase prices unsupported by cash flow, unclear asset definitions, or aggressive timelines can all raise lender concerns.

Buyers may also assume that all SBA lenders evaluate deals the same way. In practice, lender credit appetite, industry experience, and internal policy vary widely, which is why lender selection is critical.

How Pioneer Capital Advisory Supports Buyers from LOI to Commitment

Pioneer Capital Advisory works exclusively with acquisition buyers navigating SBA 7(a) financing. Once a deal is under LOI, we help clients prepare a complete lender-ready presentation that reflects both SBA requirements and lender expectations.

We then identify and approach lenders that are a strong fit for the specific transaction, rather than broadly shopping the deal. After proposals are received, we assist buyers in comparing options and selecting the right lending partner.

As the deal progresses, our team coordinates closely with the lender through underwriting and pre-closing, helping buyers stay organized and responsive as conditions are satisfied. While final credit decisions always rest with the lender and SBA, our role is to guide the process efficiently from start to finish.

Conclusion

Securing lender commitment after an LOI is not automatic, but it is achievable with the right preparation and guidance. SBA lenders want well-structured deals, credible buyers, and clear evidence of repayment ability.

By understanding what lenders evaluate and how the process unfolds, buyers can avoid common pitfalls and move more confidently from LOI to closing.

If you have a signed LOI and are preparing to pursue SBA acquisition financing, Pioneer Capital Advisory can help you position your deal and navigate the path to lender commitment.