Steps to Secure an SBA Loan to Purchase a Business in Oklahoma

It’s popular for buyers to use the SBA Loan to purchase a Business in Oklahoma. Purchasing an existing business is one of the fastest ways to become a business owner in Oklahoma—but most buyers don’t have the cash on hand to pay the full purchase price. That’s where the U.S. Small Business Administration (SBA) comes in. Through its well-known 7(a) Loan Program, the SBA helps Oklahoma entrepreneurs access affordable financing with lower down payments, competitive interest rates, and longer repayment terms than many traditional bank loans.

If you’re considering securing an SBA Loan to purchase a Business, understanding the SBA loan process is essential. Below is a comprehensive, step-by-step guide on how SBA financing works when acquiring a business in Oklahoma and what lenders require before approving your application.

1. Understand What an SBA 7(a) Loan Is

The SBA does not lend money directly. Instead, it guarantees a portion of the loan to a bank or approved lender. This reduces the lender’s risk and allows them to offer more favorable terms.

Common features of SBA 7(a) loans for business purchases:

• Loan amounts up to $5 million
• Repayment terms up to 10 years, but if real estate is involved, this term can be extended.
• Down payments are typically around 10–20%. This is not SBA specific and applies to most other lending institutions.
• Competitive, regulated interest rates
• Ability to finance goodwill, inventory, equipment, and working capital

For many Oklahoma buyers, an SBA loan is the most accessible path to business ownership.

2. Determine Whether the Business Is Eligible

If you’re using an SBA Loan to purchase a business, it’s not a one-size-fits-all process. SBA loans can only be used to purchase independently owned, for-profit businesses that meet size standards. However, additional eligibility requirements apply.

The business must have:

• A proven track record of profitability. This is shown through tax and other financial records reflecting a record of profitability.
• Clean financial records. If the financial records aren’t clear, it’s not an investment the SBA will guarantee.
• Tax compliance. If the business has tax problems it’s probably not profitable and is high risk in the eyes of the SBA
• Verifiable cash flow sufficient to support loan repayment

The business cannot involve:

• Passive real estate investments
• Illegal activities
• Speculative ventures

Before applying, the buyer’s attorney or CPA should review the seller’s financials to confirm the business meets SBA requirements.

3. Prepare Your Personal Financial Profile

Even though you are purchasing an existing business, lenders expect the buyer to demonstrate strong personal financial stability.

You should prepare:

Personal credit report

You will need to provide credit reports from both major credit reporting agencies. A history of being able to pay your creditors and the type of creditors that you have used is important to the SBA. A score of 650 or higher is typical for approval.

Personal financial statement

Disclosing:

• Assets: the type of asset and if you own it free and clear, or if it is used a security for another loan
• Liabilities are both long-term and short-term liabilities.
• Income both before and after tax.
• Net worth, including all real property and other financial accounts that you owe.

Personal tax returns (typically last 2–3 years)

Resume or experience summary

It’s not unusual for borrowers to miss this step. You should understand that lenders want to know you have the experience to manage the business successfully. I tell my clients that this is a time to showcase their ideas and skills in a more personal way. Sell yourself and the business that you are trying to purchase. Your financial profile is one of the most important factors in the approval process.

4. Gather the Business’s Financial Documentation

Next, lenders will examine whether the business generates enough cash to repay the loan. Expect to provide detailed documentation from the seller.

SBA lenders typically require:

• Three years of profit and loss statements
• Three years of balance sheets
• Three years of business tax returns
• Current financial statements
• Sales reports
• Accounts receivable and accounts payable summaries
• Inventory lists and equipment lists
• Existing contracts and leases

Your attorney should review these documents for legal compliance and undisclosed liabilities before they are submitted to the lender.

5. Obtain a Business Valuation

The SBA requires a formal, independent business valuation from a qualified third party. This valuation ensures the lender is not financing more than the business is worth. Buyers and sellers might look at different things when valuing a business. Some look for gross revenue, while others look to net income before tax and depreciation. The best way depends on the business you are looking at, and usually involves a multiple or percentage of the revenue or income method being used.

Accepted valuation methods include:

• Income or cash-flow valuation that is specific and considers quarterly and yearly income and cash-flow.
• Market comparison that focuses on competitors and how your business adds value to the market.
• Asset-based valuation that considers all assets of the business, including physical and intellectual property.

The lender must confirm that the purchase price is reasonable and supported by the business’s financial performance.

6. Prepare a Detailed Business Plan

Even though you are buying an existing business, the SBA requires a forward-looking business plan that explains how the business will operate under your ownership.

Your plan should include:

• Your qualifications and background
• An analysis of the business and industry
• Marketing plans
• Operational plans
• Projected cash flow and financial forecasting
• A transition plan (whether the seller will stay on temporarily)

Lenders use this plan to evaluate whether you understand the business and have a realistic plan for success.

7. Structure the Purchase Agreement

An SBA lender will require a signed Letter of Intent (LOI) or Purchase Agreement outlining:

• Purchase price
• Assets being sold
• Allocation of purchase price
• Training/transition assistance from seller
• Whether seller financing is involved
• Conditions to closing

Because SBA lenders scrutinize these agreements, it is crucial to have an Oklahoma business attorney draft or review the contract before signing. A poorly drafted purchase agreement is one of the most common reasons SBA loans get delayed or denied.

8. SBA Loan Approval and Closing

Upon approval, the lender issues a Loan Commitment Letter outlining the final terms of the loan, including:

• Interest rate
• Loan amount
• Required down payment
• Collateral requirements
• Personal guarantee obligations
• Any conditions that must be met before closing

Final Thoughts

Closing typically involves two separate events:

1. Loan closing — signing loan documents with the lender.
2. Business acquisition closing — completing the sale with the seller.

Your Oklahoma business attorney will coordinate both closings, review all final documents, and ensure all legal requirements are satisfied.

Business Lawyers in Oklahoma You Can Count On?

An experienced Oklahoma business attorney can:

• Review or draft purchase agreements
• Negotiate seller terms
• Conduct legal due diligence
• Assist with entity formation
• Coordinate with lenders and CPAs
• Protect your liability and investment

For a free and absolutely confidential consultation with a business lawyer in Tulsa at Kania Law Office, call 918.743.2233. Or you can ask a free online legal question by following this link.