Need Help with Business Acquisition Financing After an LOI? Here’s the Playbook

Signing a Letter of Intent (LOI) to acquire a business is exciting. It means you have aligned with the seller on price and high-level terms and are ready to move forward. For many buyers, however, this is also the point where uncertainty sets in.

Questions quickly arise. How does SBA financing actually work after an LOI? What do lenders need? How long will it take? And what mistakes could derail the deal?

For SBA 7(a) acquisition loans, the post-LOI phase is where deals are either positioned for approval or quietly fall apart. This playbook outlines what typically happens after an LOI is signed and how buyers can navigate the financing process with clarity and confidence.

Step 1: Understand What the LOI Does and Does Not Do

An LOI is not a financing approval. It is a framework that allows you to move forward with diligence and lender discussions. From an SBA lender’s perspective, the LOI provides critical information such as purchase price, deal structure, and proposed timing, but it does not reduce underwriting requirements.

At this stage, lenders will begin evaluating whether the transaction is financeable under SBA 7(a) guidelines. This evaluation is subject to lender discretion and SBA SOP requirements, and outcomes may vary by lender.

The key takeaway is simple. Once the LOI is signed, financing becomes the gating item for the entire transaction timeline.

Step 2: Build a Lender-Ready Deal Package

After an LOI, the most important step is assembling a complete and credible lender presentation. SBA lenders do not approve ideas. They approve well-documented transactions that clearly demonstrate repayment ability.

A lender-ready package typically includes buyer background information, historical financials for the target business, pro forma projections, sources and uses of funds, and a clear explanation of the transaction structure.

Cash flow analysis is central. Lenders will evaluate whether the business can service the proposed debt while maintaining a reasonable margin of safety. Debt service coverage ratios are reviewed carefully, and while minimum thresholds vary by lender, weak or overly aggressive projections often lead to delays or denials.

This is where many buyers struggle. Incomplete narratives, inconsistent numbers, or unsupported assumptions create friction in underwriting and slow momentum.

Step 3: Match the Deal to the Right SBA Lenders

Not all SBA lenders view acquisitions the same way. Appetite varies based on deal size, industry, buyer experience, and transaction complexity.

Presenting a deal to the wrong lender can cost weeks or months. Even worse, early rejections can create perception issues if the deal is widely shopped without a strategy.

A disciplined approach focuses on identifying lenders whose credit profile aligns with the specific transaction. This typically includes considering factors such as loan size, industry familiarity, collateral expectations, and tolerance for first-time buyers.

Effective lender matching improves both approval odds and execution speed, though final credit decisions always remain with the lender.

Step 4: Navigate Underwriting and Due Diligence

Once a lender expresses interest and issues preliminary terms, the deal moves into underwriting. This phase is detailed and document-intensive.

Lenders will typically request additional financial support, third-party reports, and clarification around operational risks. Depending on the transaction, this may include quality of earnings analyses, appraisals, environmental reports, and verification of key contracts.

Buyers should expect multiple rounds of questions. This is normal. Underwriting is not just about checking boxes; it is about building confidence that the loan can be repaid according to SBA standards.

Delays often occur when buyers are reactive instead of proactive. Understanding what lenders are likely to request and preparing in advance can significantly reduce friction.

Step 5: Final Approval and the Path to Closing

After underwriting is complete and conditions are satisfied, the lender will move toward final approval and closing. This phase includes legal documentation, SBA authorization, and coordination among attorneys, escrow agents, and third-party providers.

Timelines vary based on deal complexity and responsiveness from all parties. While some acquisitions close smoothly, others encounter last-minute issues tied to documentation gaps or unmet conditions.

Buyers should remember that SBA loans are subject to both lender policy and SBA program requirements. Final terms, structure, and timing are ultimately determined by the lender and must remain compliant with SBA guidelines.

Common Pitfalls Buyers Face After an LOI

Many acquisition delays stem from avoidable issues. These include unrealistic projections, unclear deal structures, underestimating equity requirements, or assuming SBA approval is guaranteed.

Another common mistake is waiting too long to engage financing support. The earlier the financing strategy is aligned with the LOI, the smoother the process typically becomes.

Clear communication, accurate financial modeling, and lender-aligned positioning are essential throughout the post-LOI phase.

How Pioneer Capital Advisory Supports Buyers After an LOI

Pioneer Capital Advisory works with business buyers after an LOI is signed to help guide the SBA 7(a) financing process from start to finish.

PCA assists buyers in preparing lender-ready deal materials, positioning transactions for underwriting, and identifying lenders that are a strong fit for the specific acquisition. PCA also helps buyers understand lender requests, manage timelines, and stay organized through underwriting and closing.

PCA does not structure legal entities or file documents on behalf of clients. Instead, PCA provides guidance, coordination, and clarity throughout the financing journey, acting as a bridge between buyer and lender from LOI through closing.

All financing outcomes are subject to lender approval and SBA requirements, and results may vary by transaction.

Conclusion

An LOI is the starting line, not the finish. SBA 7(a) acquisition financing requires preparation, strategy, and disciplined execution after the LOI is signed.

Buyers who understand the post-LOI process and take a proactive approach are better positioned to move efficiently from intent to ownership. With the right guidance and lender alignment, the SBA financing process can be navigated with far less uncertainty.

If you have an LOI in place and are evaluating SBA acquisition financing, now is the time to build a clear plan forward.