A year-end check-in, plus a simple SBA rule that can save you headaches

As we get to the very end of the year, something usually changes.

Fewer meetings. More time with family. More time to think.

So I wanted to send a quick, friendly update with two goals:

1. Share a few 2025 wins from our team at Pioneer Capital Advisory
2. Explain one SBA collateral rule that often surprises buyers, and a simple planning move that can help you avoid an unwanted lien on your home

A quick heads up on timing

Before I get into the rest of this note, I wanted to let you know that I will be taking about 6 weeks of paternity leave starting on Wednesday, January 14th (potentially a bit earlier depending on when our little one decides to arrive).

If you are reaching out about a new deal on or after that date, please include my Chief Operating Officer, Valerie Stash, on the communication. Her email is valerie@pioneercap.com. She and the team will make sure you are taken care of.

First, a quick 2025 recap

I am really grateful for everyone who trusted us this year.

Here are a few highlights:

1. We closed 53 SBA 7(a) acquisition loans totaling $124,473,122
2. We served 51 unique clients
3. Several clients we supported were featured on Will Smith's Acquiring Minds podcast this year, including Anica John, Bryan Houck, and Kevin Black (links below)
   • ​A $10m Acquisition for Freedom and Family | Anica John​
   • ​4th Time's the Charm: 3 Broken Deals to Buy a Great Business | Bryan Houck​
   • ​How 1 Couple Bought 2 Businesses | Lindsey Buckheit & Kevin Black​
4. Our team has grown to 9 full-time members (including myself), up from 2 team members at the start of the year
5. The Green Bay Packers clinched a playoff spot on Christmas Day-which may or may not be as important as the other items on this list, depending on who you ask

When I look back at the year, what stands out most is not just the volume of deals we closed, but the quality of the relationships we built along the way.

We worked with searchers from all kinds of backgrounds - some with deep operating experience, some making the jump from consulting or finance, and some who were career switchers taking a calculated bet on themselves. What they all had in common was a willingness to do the work, ask good questions, and trust the process even when things felt uncertain.

The growth of our team has been one of the most rewarding parts of this year. Adding seven new team members allowed us to build out a verticalized approach that mirrors the same model top SBA banks use internally. We now have dedicated specialists in sales, underwriting, and closing operations. This structure means that when you work with Pioneer, you are getting the same level of sophistication and specialization that the banks themselves have, but working on your side of the table.

What this looks like in practice is pretty straightforward. When you come to us with a deal, our:

• Sales team qualifies the opportunity and makes sure it is positioned correctly from the start.
• Underwriting team then packages everything according to exactly what banks need to see, formatted the way they want to see it, with the right level of detail and supporting documentation.
• Closing team manages all of the back and forth coordination to get you from term sheet to funding.

The result is a much smoother process for you, and a much faster timeline overall. In fact, if we have all of the items we need for a client's deal at the start of the engagement, we are typically able to get that deal in front of banks to obtain term sheets within two business days. That speed matters when you are trying to move quickly on a competitive opportunity or when you need to hit specific timing milestones laid out in your LOI.

Second, what we are seeing from banks right now

If you have felt like banks are asking more questions than they used to, you are not imagining it.

Here is what our team is seeing:

1. Banks are getting more conservative on underwriting
2. Defaults are driving tighter credit boxes. Some of the larger SBA banks have had defaults in parts of their portfolios, and that has been one reason we have seen standards tighten
3. Post-closing liquidity is under a microscope
   • In simple terms, banks want to know how much cash you will still have after you fund your share of the down payment
   • As a buyer, this is something you should think about early, not at the end
4. Experience matters more than it used to
   • Banks are not as excited as they used to be about buyers who feel "green" from a professional standpoint
   • You can still get a deal done, but you need a clear story for why you are the right person to run the business and handle the transition

Let me expand on that last point a bit, because I think it matters.

A few years ago, banks were more willing to take a leap of faith on a buyer who had strong credentials but limited direct operating experience. The logic was: smart person, good pedigree, they will figure it out.

That is changing.

Now, lenders want to see a tighter connection between what you have done professionally and what the business you are buying actually does. If you are buying a manufacturing business, they want to see that you have managed operations, dealt with supply chains, or at least worked in an industrial environment. If you are buying a service business, they want to see client management experience, P&L ownership, or something that shows you understand how to retain and grow a customer base.

This does not mean you need to have run the exact same type of business before. But it does mean you need to be thoughtful about the story you are telling. Why does your background set you up to succeed in this specific business? What transferable skills do you bring? How are you planning to bridge any gaps during the transition period?

The buyers who are winning deals right now are the ones who can articulate that clearly and confidently, both in their underwriting materials and in their conversations with lenders.

What this means for you if you are still searching

If you are in the middle of your search, this is a good time to start thinking about how you will position yourself when you do find a business.

Do not wait until you are under LOI to start crafting your narrative. Think about it now. Write it down. Practice explaining it to someone who does not know you. Get feedback.

And if there are gaps in your experience, think creatively about how you can fill them before you get into underwriting. Can you bring on an advisor with deep industry knowledge? Can you line up a part-time CFO or operational consultant who will be there during the transition? Can you point to specific steps you have already taken to learn the business, like spending time shadowing the seller or talking to key customers?

Banks want to feel confident that you are not going to be learning on the fly. The more you can show them that you have a plan and that you have thought through the risks, the easier the process will be.

Quick reminder: we also help with non-SBA deals now

We have started taking on non-SBA acquisition financing too.

The lenders we work with in that world tend to want a pretty specific profile:

1. The business generally exceeds $2,000,000 of EBITDA
2. The sponsor either has:
   • Transferable industry experience tied to the business they are buying
   • Or a deal and finance background with strong execution capability

One thing we are seeing a lot is SBIC funds being part of the lender mix. And a common theme is that they want the option to co-invest alongside the sponsor.

We are newer in this segment than we are in SBA, but we are getting good traction and we are excited about where it is heading.

The non-SBA market operates a bit differently than the SBA world. The underwriting is more customized. The terms are more negotiable. And the lenders tend to care a lot more about the specific dynamics of the business: industry trends, competitive positioning, customer concentration, that kind of thing.

If you are looking at a business that is too large for SBA or does not fit cleanly into the SBA box for some other reason, it is worth having a conversation with us early. The earlier we can get involved, the better we can help you think through structuring options and figure out which lenders are going to be the best fit for your deal.

A simple SBA rule that can impact your house - and what to do about it before you quit your job

Here is the core idea.

In a lot of SBA acquisitions, the purchase price includes a big chunk of goodwill. That is hard for a bank to liquidate.

So even after the bank takes liens on business assets, there can still be a collateral shortfall.

When there is a shortfall, SBA rules often push the bank to look next at the borrower's personal real estate.

The key test is 25% equity

This is the simple rule of thumb:

1. If you have 25% or more equity in your home, and there is a collateral shortfall, a lien on your house is often required under SBA rules
2. If you have less than 25% equity, SBA does not require the lender to take the house as collateral—it becomes a bank discretion call, and most banks will not push for it

Let me explain why this rule exists in the first place, because understanding the "why" makes the strategy clearer.

Most lenders will not bother if you are below the 25% threshold. It is not worth the hassle, and frankly, there is not enough recoverable equity there to make it worthwhile from a risk perspective.

Why this matters for timing, especially if you are thinking about quitting your job to search full-time

This is where I see a lot of smart, thoughtful searchers miss a simple planning step that can make a real difference later.

If you are planning to leave your W-2 job to search full-time, there is one financial move you should think about before you turn in your resignation: putting a home equity line of credit in place on your house.

I know that might sound oddly specific. But here is why it matters.

The qualification window closes fast

Once you leave your job, getting a HELOC becomes much harder—sometimes impossible.

Most lenders want to see stable W-2 income. They are not excited about approving big credit lines for someone who just resigned and is living off savings, even if that person has a smart plan and a clear path forward.

So the time to act is while you still have that steady paycheck and can check all their boxes easily.

Think about it from the HELOC lender's perspective. They are making an unsecured decision to give you access to potentially hundreds of thousands of dollars. They want to know you have reliable income to pay it back if you ever draw on it. A W-2 salary checks that box cleanly. Savings and a vague plan to buy a business in the next 12 to 24 months? Not so much.

The irony is that the moment you need the HELOC most, when you are in the middle of an SBA deal and trying to manage your equity position, is the moment when it is hardest to get one approved.

Even if you never use it, having a HELOC changes the math

Here is the part that surprises people.

You do not actually need to draw on the HELOC for it to be helpful. Just having the line in place increases your total debt on paper, which reduces your equity percentage.

And as we covered above, if your equity drops below 25%, taking a lien on your home stops being an SBA requirement. It becomes a lender judgment call. And in most cases, they will not push for it.

So a HELOC you might never touch can quietly shift you from "lien required" territory into "lien optional" territory. That is a much better place to be when you are negotiating terms on a deal.

Let me give you a concrete example of how this plays out.

Say you own a home worth $800,000 and you have a $500,000 mortgage. Your equity is $300,000, which is 37.5% of the home value. You are well above the 25% threshold. If you go buy a business and there is a collateral shortfall, the SBA lender is almost certainly going to require a lien on your house.

Now imagine you set up a $200,000 HELOC before you quit your job. Even if you never draw a dollar from it, your total debt is now $700,000 (mortgage + HELOC). Your equity drops to $100,000, which is 12.5% of the home value. You are now below the 25% threshold. The SBA no longer requires the lien. And most lenders will not push for it on their own.

Same house. Same mortgage. Just one additional step before you left your job. And suddenly, your home is off the table in your deal negotiations.

Most people think about this backward

The typical pattern goes like this:

You find a great business. You get under LOI. You start working with a lender. Everything is moving forward.

Then, halfway through underwriting, the lender mentions they are going to need a lien on your house because of a collateral shortfall.

At that point, you think, "Maybe I should go get a HELOC to fix this."

But now you are self-employed. You do not have W-2 income anymore. And the HELOC lender looks at your application and says no - or asks for documentation you cannot easily provide.

The window has already closed.

I have seen this happen more times than I can count. And it is frustrating because it is so easily avoidable if you just think about it a few months earlier.

The right move is to plan ahead

If you are under LOI right now and working through financing, take a deep breath. Trust the process. Lean on your advisors. And remember that even when things feel uncertain, most deals do end up closing if everyone stays focused and keeps moving forward.

And if you are earlier in your search, still looking at deals, building your pipeline, refining your thesis, use this time to get your ducks in a row. Think about how you will tell your story. Make sure your personal finances are in order. And if you own a home, seriously consider setting up that HELOC before you take the leap into full-time search.

The little things you do now to set yourself up for success will pay off in a big way when you finally find the right business and need to move quickly.

For pre-LOI buyers ready to explore opportunities: Schedule a meet & greet call​

Already have a deal under LOI and need financing help: Schedule an LOI consultation​

Matthias Smith​
Pioneer Capital Advisory LLC

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.