A buyer I watched last year had a signed LOI on an online services business, a loan around $1.1M, and five lenders on the phone.
One lender didn't even look at the business. It tried to qualify the loan off the buyer's personal W2 income instead. That's a no before the conversation starts.
Another lender, one of four preferred referrals, looked at the actual financials and said the 2023 SDE was too low. Three more said the same thing about 2024.
All of them wanted to see 2025 numbers before they'd commit to anything.
He'd already signed the LOI. The lender conversation happened after.
I see this backwards more often than I'd like in the searcher communities I'm in. Buyers treat the LOI as the finish line and the loan as a formality that happens next, but the loan is the thing that actually has to say yes. And it evaluates the business with a colder set of eyes than the buyer used to fall in love with it.
Run the deal past lenders before you write the offer
I've watched a different buyer do this the other way around, and it's the better version. His routine: any deal he's seriously considering, he runs past his preferred lenders before he submits an LOI, specifically to hear why a lender might say no.
He said this taught him things his own numbers didn't. Which years of SDE trend actually spook underwriting. What a revenue decline does to a deal even when the trailing multiple still looks fine. He started adjusting his own quick calculator around it, tightening what he'd even consider offering on.
The real payoff, in his words, is that he stopped writing LOIs on deals that were never going to finance in the first place. A rejected LOI costs you weeks. A rejected lender conversation costs you an afternoon.
Turn a no into a price
Back to the buyer talking to five lenders after the fact. When the first preferred lender told him the SDE was too low, he didn't just accept the no. He asked the lender a follow-up: given these numbers, what purchase price would actually make sense?
I think that's the single most useful question in this whole post. A lender's underwriting model is, in effect, a free valuation opinion, and most buyers never ask for it directly.
That lender ghosted him after the question, probably buried under other deals, so he never got a number back.
But the instinct was right: when a bank says no on price, ask what price would get you to yes, then take that number into the seller negotiation.
Lenders are not interchangeable
One thing I hear again and again from buyers who've talked to more than one lender: they are not the same product with a different logo.
Some lenders check whether the DSCR clears their internal minimum and push the deal forward from there. That's it.
Others treat the file like a free second quality of earnings review and will tear a deal apart looking for what's wrong with it.
A buyer working an off-market deal put it well: the lenders worth being grateful for are the ones who killed his bad deals before he owned them.
I'd treat that as a screening tool, honestly.
A guide on picking an SBA lender can walk through more of the mechanics, but the behavioral split (transaction lender versus advisor lender) is the part that matters most before you're under LOI.
Don't stop at one lender either. DSCR minimums, standby terms, and rate locks move lender to lender more than most buyers expect, and the buyer who only talks to one bank never finds out what they left on the table.
Vertical specialization is rate arbitrage
Most buyers price loans by shopping rate. Fewer shop for vertical fit, and that's probably a mistake. One buyer closing on a healthcare-adjacent services practice ended up with a bank that had a department built specifically around medical businesses, and locked 6.5% for 5 years, a meaningfully better rate than what generalist SBA lenders were quoting elsewhere in that same window.
The mechanism makes sense once you think about it. A lender that underwrites 40 medical practices a year has real data on how that revenue behaves. A generalist lender is pricing risk it doesn't fully understand, so it prices it higher, or it hesitates.
Hesitancy shows up on the other side of this too. A buyer closing on a children's play center ran into lenders who were uneasy about the category generally. A bigger down payment resolved it. More equity in the deal bought back the lender's comfort. Worth knowing before you're mid-negotiation and scrambling.
Below $1M, don't assume SBA is your only option
There's a lane a lot of first-time buyers skip past entirely: conventional bank financing. One buyer closing on a small retail business, purchase price around $930K, got a conventional loan at 75% LTV, $700K financed, 7-year full amortization, about 6.75% fixed, 25% down. The prepayment penalty stepped down over the loan, starting around 3% and shrinking each year.
SBA loans price around Prime plus 2.75% right now, because the government guarantee is what convinces the bank to lend past its normal risk tolerance, and that guarantee costs something. Conventional financing skips the guarantee, which means it also skips SBA's underwriting flexibility. You generally need stronger collateral and a bigger down payment to clear it. But if you can clear it, the rate can land meaningfully below what SBA quotes, and you avoid some of the SBA-specific paperwork entirely.
I don't think this lane gets talked about enough. Most searchers assume SBA 7(a) by default the moment the deal is under $5M, and for a lot of deals that's the right call. Below $1M, with clean collateral, it's at least worth a phone call to a conventional lender before you assume anything.
Liquidity doesn't end at the down payment
Lenders generally want to see personal liquidity left over after the down payment, roughly 8 to 10% of the loan amount, sitting in cash or liquid assets you're not spending on the deal. On a $1M loan, that's around $100K they want to see untouched.
I think the part that trips people up is this: bringing in investor money doesn't exempt you from it. Multiple buyers who talked to multiple bankers got told the same thing.
Lenders want a cushion that's yours personally, separate from the deal, for the first rough months of ownership: cash you haven't already poured into the purchase.
I keep coming back to the sequencing question with the online-services buyer from the top of this piece. He got his answer eventually, three SDE-driven no's and a fourth lender still waiting on fresher financials, all after he'd already signed. I don't know if that deal financed in the end. I suspect it did, on adjusted terms, because that's usually how it goes. But he spent weeks finding out what a few calls in month one would have told him for free.