Under LOI With an SBA Loan: What Buyers Should Be Working on Immediately

Signing a letter of intent is a major milestone in a business acquisition. It confirms that buyer and seller are aligned on price and structure, but it also starts the clock on SBA financing. Once you are under LOI, lenders expect momentum. Delays at this stage are often caused not by the bank, but by buyers who are unsure what to prioritize.

If you are pursuing an SBA 7(a) loan, the period immediately after LOI is critical. What you do in the first few weeks can significantly affect underwriting speed, lender confidence, and your ultimate ability to close.

Below is a practical, lender-driven breakdown of what buyers should be working on immediately after going under LOI with an SBA loan.

Get Clear on the Deal Structure Early

One of the first things lenders focus on is how the transaction is structured. Asset purchases, stock purchases, and transactions involving real estate each carry different underwriting requirements and timelines.

At this stage, buyers should confirm

• Whether the deal is an asset sale or stock sale
• How working capital will be handled at closing
• Whether real estate is included and how it will be financed
• If seller financing is part of the structure and on what terms

Even small changes later in the process can force lenders to restart credit analysis or request additional approvals. Aligning on structure early allows the lender to size the loan properly and apply the correct SBA rules from the beginning.

This is also where experienced SBA advisors help ensure the deal is structured in a way that is both SBA-eligible and lender-friendly, subject to lender discretion.

Start Assembling Financial Documentation Immediately

Underwriting cannot begin without complete financial information. Buyers who wait for the lender to request documents often lose valuable time.

You should be gathering

• Three years of business tax returns and financial statements from the seller
• Year-to-date profit and loss and balance sheet
• Interim financials if the business is seasonal or trending differently
• Your personal tax returns, personal financial statement, and resume

Lenders use this information to evaluate historical cash flow, assess risk, and calculate debt service coverage. Missing or inconsistent documents are one of the most common reasons SBA deals stall.

Organizing these materials early allows your lender to move quickly once the deal is formally submitted.

Understand Your Cash Flow and DSCR Position

Debt service coverage ratio is one of the most important metrics in SBA underwriting. It measures whether the business generates enough cash flow to service the proposed loan.

After LOI, buyers should work to understand

• How historical cash flow supports the proposed loan amount
• Whether add-backs are reasonable and defensible
• How debt service will look after closing
• Whether seller compensation or expenses need adjustment

DSCR requirements can vary by lender, and approval is always subject to credit standards and SBA guidelines. Addressing cash flow questions early allows time to adjust structure, pricing, or working capital before the deal is too far along.

Clarify Equity Injection and Source of Funds

SBA loans typically require an equity injection, often around ten percent, though this may vary based on risk, structure, and lender policy.

At this stage, buyers should be prepared to document

• The amount of cash they are injecting
• Where those funds are coming from
• Whether any portion involves seller financing or rollover equity
• Timing of when funds will be available

Lenders will verify that equity sources comply with SBA rules and are properly documented. Unclear or undocumented funds are a frequent cause of underwriting delays.

Addressing this early helps prevent surprises later in the process.

Prepare for Buyer Experience Review

SBA lenders do not just finance businesses. They finance operators. Under LOI, lenders will evaluate whether the buyer has the experience and support needed to successfully run the business.

Buyers should be ready to explain

• Relevant industry or management experience
• How they will transition into ownership
• Whether key employees are staying
• Gaps in experience and how they will be mitigated

A strong buyer narrative often matters as much as strong financials. This is where thoughtful deal packaging can significantly influence lender confidence.

Expect and Plan for Due Diligence

While legal and financial due diligence runs in parallel with financing, buyers should understand that lenders will conduct their own review.

Common lender diligence areas include

• Customer concentration
• Contracts and licenses
• Lease terms or real estate occupancy
• Environmental considerations, if applicable

Proactively addressing potential red flags gives lenders comfort and reduces the risk of late-stage conditions.

Align With the Right SBA Lender Early

Not all SBA lenders are a fit for every transaction. Size, industry, deal structure, and buyer profile all matter.

Once under LOI, buyers benefit from working with advisors who can

• Match the deal to lenders with relevant experience
• Set realistic expectations on timeline and conditions
• Help compare financing proposals when available

Lender fit plays a major role in both approval probability and how smooth the process feels from underwriting through closing.

Conclusion

Going under LOI is not the time to wait and see. It is the time to act. Buyers who treat the post-LOI period as a structured preparation phase consistently experience faster approvals and fewer surprises.

By focusing immediately on deal structure, documentation, cash flow, equity, and lender alignment, you position your SBA loan for a smoother path to closing. While timelines and requirements may vary by lender, preparation and clarity are always within the buyer’s control.

At Pioneer Capital Advisory, we guide buyers from LOI through closing by helping package the deal, identify the right lenders, and keep the process moving efficiently and compliantly.