SBA Loan (Practice Acquisition)

Definition

A Small Business Administration-guaranteed loan commonly used to finance the purchase of a professional services firm, including CPA practices. SBA 7(a) loans are popular for this purpose because they allow buyers to acquire a book of business with a relatively low down payment, typically 10%, spread over a 10-year repayment term. Lenders evaluate the target firm's historical cash flow and the buyer's creditworthiness when underwriting these deals.