When you start looking into buying a business, one of the first things you need to know is: “How much money can I borrow?”

The SBA 7(a) loan is one of the most popular ways to buy a small business in the United States. It is great for first-time buyers or smaller deals where a regular bank loan might not work. However, the program has strict limits.

Knowing these limits early on is crucial. If you assume you can borrow the maximum amount without checking the details, you might run into trouble later. Buyers who understand how SBA loans actually work can make better deals and close faster.

Here is a simple breakdown of what the SBA 7(a) loan limit means and how much you can really borrow.

What Is an SBA 7(a) Loan?

First, let’s clarify what this loan is. The SBA (Small Business Administration) does not lend you money directly. Instead, they work with banks and lenders.

The SBA acts as a safety net. They guarantee a portion of the loan, which lowers the risk for the bank. Because the SBA has the bank’s back, the bank is more willing to lend to you with better terms, like longer repayment periods.

This loan is commonly used to:

• Buy an existing business
• Buy out a partner
• Buy out a retiring owner

What Is the Maximum Loan Amount?

The official maximum amount you can borrow with a standard SBA 7(a) loan is $5 million.

It is important to remember that the bank still takes on some risk. Even though the SBA guarantees a large chunk of the loan (usually 75% to 85%), the bank is still on the hook for the rest. Because of this, banks will look very closely at your deal to make sure it makes financial sense.

Can the Loan Cover the Entire Purchase Price?

Short answer: No.

Even though the limit is $5 million, you usually cannot borrow 100% of the money needed to buy the business. Banks typically require you to have some “skin in the game.”

In a standard deal, you usually need:

• A Down Payment (Equity): usually around 10% of the total cost.
• Good Cash Flow: The business needs to make enough money to easily make the loan payments.

For example, if you are buying a business for $6 million, you can only borrow up to $5 million from the SBA. You would need to find the other $1 million through your own savings or a loan from the seller.

Limits for People with Multiple Businesses

If you already own a business with an SBA loan, that counts against your limit.

The $5 million cap applies to you and your combined businesses. If you already have a $2 million SBA loan for one company, you only have $3 million left to use for a new acquisition. The bank will look at all your business debts together to make sure you aren’t borrowing too much.

What Actually Decides Your Loan Size?

Just because the limit is $5 million doesn’t mean the bank will give you that much. In reality, the bank looks at risk.

Here are the main things that limit how much you can borrow:

• Cash Flow: This is the most important factor. The business must generate enough profit to pay its bills, pay you a salary, and pay back the loan.
• Your Experience: If you have never run a business before, banks might be hesitant to lend you the full amount.
• Industry Risk: Some industries are considered riskier than others.
• Collateral: While cash flow is key, banks also like to see assets (like equipment or real estate) that secure the loan.

What is the Average Loan Size?

Most people don’t borrow the full $5 million. The average SBA 7(a) loan is usually between $500,000 and $2.5 million. This is because most small businesses fit into this price range.

Repayment Terms (How Long You Have to Pay It Back)

One big benefit of SBA loans is the repayment time.

• 10 Years: For buying a business, you typically get 10 years to pay it back.
• 25 Years: If real estate is a big part of the purchase, you might get up to 25 years.

Longer terms are great because they lower your monthly payments, making it easier for the business to afford the loan.

How JNI Commercial Lending Can Help

At JNI Commercial Lending, we help buyers figure out exactly what is possible before they start making offers.

Instead of guessing, we help you understand how a bank will view your deal. We help you:

• Calculate how much you can realistically borrow.
• Figure out your down payment and structure.
• Prepare the financial documents banks need to see.
• Manage the process from start to finish.

The SBA 7(a) program allows for loans up to $5 million, but your actual limit depends on the business’s profits, your experience, and the bank’s rules.

By understanding these limits early, you can make smarter offers and avoid surprises. If you want to know exactly how much financing your deal can support, reach out to us at JNI Commercial Lending.