Navigating the New SBA Waters

Why the Right M&A Advisor Makes All the Difference

The Small Business Administration (SBA) just threw a curveball with new rules that shake up how business acquisitions and partner buyouts get financed. If you’re in the middle of a deal or even just thinking about one, these changes matter. Read more about those changes here.

As NorthStar Partner John Gorbutt put it,

“The rule book changed; the fundamentals didn’t. When we bring predictable cash flow, diversified revenue, and a clean cap table, SBA lenders stay at the table and deals move.”

That’s why you need a true advisor—someone who doesn’t just interpret the SBA legalese, but translates complex rule changes into clear, actionable steps, proactively removes roadblocks, and tailors strategies to your specific business, ensuring a smooth, successful transaction.

We’re not going to dive into the fine print of the new SBA rules here — you can read more about the specifics in Sam Criales’ overview. Today, we’re taking a higher-altitude view — connecting the dots between these regulatory shifts and what they mean for you, the business owner preparing for or considering a sale.

When lending standards tighten or capital requirements shift, even small changes can ripple through an entire transaction. Deals can stall, valuations can wobble, and buyer confidence can fade fast. That’s why it’s critical to understand three things at a high level:

• What’s changed: how new SBA requirements reshape the financing landscape and limit which buyers can qualify.

• What you need to do: the steps that strengthen your company’s financial story, credibility, and bankability.

• How an advisor helps: by translating policy into practical strategy, coordinating with lenders and CPAs, and ensuring your deal stays financeable from day one.

Taking these actions doesn’t just protect your deal; it adds value to your business. A well-prepared company attracts more qualified buyers, commands stronger offers, and moves through due diligence faster. The right M&A advisor doesn’t just react to change; they anticipate it, navigate it, and turn it into opportunity.

1. Buyer Qualification Tightened — Expand Your Buyer Strategy  

What Changed: Only U.S. citizens or lawful permanent residents can now qualify for SBA-backed loans.

What to Do:

• Broaden your buyer outreach to include strategic and cash buyers, not just SBA-financed ones.

• Work with your advisor to pre-qualify buyers early, verifying their funding sources and lender relationships.

  
  

How an M&A Advisor Helps: A good advisor quickly spots real buyers and keeps your deal moving—even under tighter rules.

Value Impact: Expanding beyond SBA-dependent buyers keeps your timeline on track and prevents deal fatigue.

2. Small Loans Got Smaller — Strengthen Your Financial Story  

What Changed: The SBA lowered the “small loan” threshold from $500K to $350K and raised the minimum credit score to 165.

What to Do:

• Tighten your books and maintain CPA-reviewed financials.

• Emphasize recurring revenue, diversified clients, and profitability, not just top-line growth.

  
  

How an M&A Advisor Helps: Your advisor reviews your numbers like a buyer or lender, helping clean up issues and spotlight strengths before due diligence.

Value Impact: Accurate, verifiable numbers boost lender confidence and justify higher valuations.

3. Franchises Must Be Registered — Confirm Early  

What Changed: The SBA’s franchise directory is back — only listed franchises are eligible for financing.

What to Do:

• Verify that your franchisor is listed well before going to market.

• If not, work with your advisor to coordinate registration and ensure compliance.

  
  

How an M&A Advisor Helps: A sharp advisor anticipates regulatory roadblocks and checks eligibility upfront to keep deals moving.

Value Impact: Avoiding last-minute financing disqualifications protects your buyer pool and ensures a smoother process.

4. Partial Sales Need Proof — Get Audit-Ready  

What Changed: For partner buyouts or minority transfers, third-party verification (CPA financials or sales tax records) can replace tax returns — but accuracy is key.

What to Do:

• Maintain clean, CPA-verified financial statements.

• Document ownership and earnings clearly for every stakeholder.

How an M&A Advisor Helps: A good advisor organizes your records and works with your CPA before buyers or lenders show up, preventing problems early.

Value Impact: Being audit-ready accelerates financing approvals, reduces closing friction, and increases buyer trust.

5. More Guarantees Required — Work with Your Advisor Early 

 

What Changed: Sellers retaining less than 20% ownership must personally guarantee the loan for two years, and any retained equity requires co-borrower status.

What to Do:

• Engage your M&A advisor early to model deal options that reduce personal exposure.

• Align earnouts, seller financing, and guarantees with your long-term financial and personal goals.

  
  

How an M&A Advisor Helps: An experienced advisor structures your deal to satisfy SBA requirements while protecting your interests and balancing everyone's needs, especially the sellers.

Value Impact: Early collaboration with your advisor ensures the deal is financeable, minimizes personal risk, and safeguards your proceeds.

The M&A Advisor's Role: Your Navigator Through Change  

When the SBA changes the rules, it’s easy to feel lost in the weeds. This is where a real M&A advisor makes all the difference—not just by anticipating rule changes, but by translating uncertainty into clear strategies tailored to your business.

Here’s what a real advisor should do for you:

• - Cut through lender confusion and give you a clear path forward.

• - Sharpen your story so lenders and buyers see the value in your business.

• - Align your goals with what’s actually possible in today’s financing environment.

• - Bring everyone (lenders, CPAs, attorneys) to the table and keep them rowing in the same direction.

• - Help you tackle tough decisions, both emotional and strategic, so you make the right call, not just the easy one.

When your team is on the same page, uncertainty goes away and confidence (not luck) gets deals done.

 The Bottom Line: Preparation Fuels Value  

The SBA might have changed the rules, but the basics haven’t budged. Deals that close fast and get the best prices are the ones that:

• Maintain accurate, verifiable financials

• Demonstrate predictable, transferable cash flow

• Build trust through transparency and preparation

As Sam Criales, Vice President and Senior Business Development Officer at First Internet Bank, explains:

“Banks won’t finance uncertainty. When your business can produce solid financial statements, track KPIs, and forecast with accuracy, you give buyers and banks something priceless: trust.”

That trust isn’t just what funds your deal—it’s what drives real business value.

You’ve Built the Business. We’ll Handle the Exit.  

Selling your business is one of the biggest and most personal decisions you’ll ever make. At NorthStar Mergers & Acquisitions, we sweat every detail, protect what you’ve built, and guide you through a sale that feels right.

Learn more at www.NorthStar-Mergers.com.