Hey business buyers, and Happy New Year!

As we kick off 2025, you might already be deep into your ETA (Entrepreneurship Through Acquisition) search, or maybe you’re just considering taking the plunge into business ownership.

Either way, this is a thrilling journey, but as with any big endeavor, it comes with challenges—and a lot of moving parts.

To help you hit the ground running in 2025, I wanted to share some practical insights on a key part of the process: SBA 7(a) financing.

While there’s a lot to consider, I’ve put together five of the most common mistakes buyers make when working through the financing process.

Let’s jump in!

1. Missteps with Your Personal Financial Statement

Your personal financial statement might seem straightforward, but it’s one of the most critical pieces of your SBA loan application. Lenders will look closely at your personal liquidity to determine whether you’re financially prepared to take on the business acquisition—and they’ll want to validate everything with bank statements.

If the numbers don’t match up or there are inaccuracies, this can create major issues, including delays or even a declined loan.

Or if what you present is too confusing or unorganized, you'll be setting yourself up for failure.

This is especially important if you’re planning to raise equity or rely on external funding. The SBA wants to know that you have enough “skin in the game” to cover the required down payment, so presenting a clear, accurate picture of your finances is critical.

Don't make your banker give you this look:

How to Avoid It: Start with the SBA Personal Financial Statement Form, and ensure every detail is correct. Double-check your numbers, be prepared to provide bank statements for validation, and avoid inflating or misrepresenting your financial situation. If you’re unsure how to prepare this, consider working with a financial professional who has experience with SBA loans—it’s worth the effort to get it right.

2. Not Having a Solid M&A Attorney

Having the right attorney in your corner can make or break your acquisition. An M&A attorney who understands SBA lending requirements can guide you through complex legal and compliance issues that might come up during the deal.

For example, lenders will often require an SBA Standby Creditor Agreement to confirm that seller notes are subordinate to the SBA loan. Without an experienced attorney managing this process, it’s easy for things to get delayed—or worse, for misunderstandings to derail the entire transaction.

A strong attorney can also help with reviewing your purchase agreement, navigating earn-outs, and ensuring compliance with all SBA-required terms. This expertise can save you time, money, and stress in the long run.

What to Do: Work with an attorney who specializes in M&A and has direct experience with SBA-backed deals. If you’re unsure where to start, ask your lender or network for recommendations. While it may seem like an upfront expense, it’s a critical investment that can prevent costly mistakes down the line.

3. Overlooking Financial Due Diligence

Due diligence isn’t just about checking the seller’s financials; it’s about protecting your investment. One of the key roles of a financial due diligence provider is to validate the financial add-backs presented in the seller’s cash flow analysis. Add-backs can significantly impact your valuation, and if they’re overstated or unsupported, they can mislead you into paying more than you should.

In addition to add-backs, your due diligence provider should also confirm the working capital requirements for the business. If the working capital is under- or overestimated, it can cause cash flow issues after the acquisition.

Pro Tip: Partner with a financial due diligence firm experienced in business acquisitions. They’ll help you uncover any discrepancies, ensure you’re paying a fair price, and give you confidence in the deal structure. This step is not an area to cut corners—it’s one of the most important parts of the process.

4. Ignoring Business Licensing Requirements

If you’re buying a contractor-type business—like HVAC, plumbing, or another regulated industry—you’ll need to address licensing early in the process. Many of these businesses require a license qualifier or sponsor, and without one, you could run into compliance issues that delay your acquisition.

In some cases, the SBA allows the seller to retain a small ownership stake—sometimes as low as 1%—to serve as the license qualifier post-acquisition. However, this arrangement requires clear documentation and lender approval, which is why it’s critical to handle this step proactively.

How to Prepare: Identify the licensing requirements for the business you’re acquiring early on, and start lining up a license qualifier if needed. This may involve working with the seller or securing your own licensing qualifications. Don’t wait until the last minute to address this—it can create avoidable stress late in the deal.

5. Not Having a Plan for Raising Equity

If your acquisition strategy includes raising equity for the down payment, you’ll need a clear plan to present to the SBA and your lender. Banks will want to know where the equity is coming from, who your partners are (if applicable), and what the economic terms of the equity investment look like.

This is especially important because any uncertainty around your funding can slow down the underwriting process or create concerns for the bank.

What to Do: Whether you’re using a third-party service to help raise equity or doing it on your own, map out your strategy in advance. Be prepared to clearly explain your funding plan during underwriting and have all the necessary documentation ready to go. A well-thought-out approach shows the bank that you’ve done your homework and are fully prepared to move forward.

Final Thoughts

Buying a business is one of the most exciting journeys you can take—but it’s not without its challenges. By avoiding these five common mistakes, you’ll give yourself a solid foundation for success and make the financing process much smoother.

If you’re a first-time business buyer who’s contemplating starting the ETA process, I’d love to connect! Feel free to email me at matthias@pioneercap.com—I’d be happy to answer any questions or help you get started.

And if you’re interested in discussing how Pioneer Capital Advisory can help you on your journey, you can schedule a time to connect with me directly using this link: Schedule a Call.

Take care,

Matthias

📩 Email me at matthias@pioneercap.com 🌐 Visit us at pioneercapitaladvisory.com​

Disclaimer: The information in this newsletter is for informational purposes only and should not be considered legal or financial advice. Business buyers are encouraged to consult with their legal counsel and accountant to ensure the proper structuring of their transactions and to fully understand the tax implications of seller financing.

Thanks for reading! Feel free to reply directly to this email with any questions or thoughts.