What are the steps to finance the purchase of a business, from LOI to closing?

The sequence at a glance

The order matters more than any single step. A lender cannot issue meaningful terms without the target's latest full year of figures, cannot commit until the valuation or appraisal is back, and usually cannot fund until the landlord has consented to the lease. Starting a later step early, such as ordering a quality of earnings report before any lender has seen the deal, risks paying for work on a deal that changes shape.

Before the LOI, and the LOI itself

The best-financed deals start before the offer. An early read from lenders on how much debt the business supports, and how much equity the buyer will need, keeps a buyer from pricing a deal no lender will finance; it is covered in lender prequalification before the LOI. The letter of intent then fixes the structure every later step builds on: the price, the seller note and how it sits behind the senior loan, the working capital peg, and a financing contingency that names the loan. How to write that contingency is on the LOI financing contingency.

The signed LOI is also the first document a lender asks for, alongside the target's figures. For acquisitions, that means the target's latest full year of figures for every company being bought, never an older year. The full list is on what lenders need to finance an acquisition.

From documents to terms: the fast part

Once the documents are in, the lender package is not where a deal waits. Transparent builds the full package, with the financing model, lender presentation, blind teaser and underwriting memo, in a day; built by hand, the same package takes at least a week. The package goes to the lenders in Transparent's book that write this kind of loan, and those lenders reply with indicative terms: amount, structure, rate, amortization, equity and the conditions they expect.

The buyer chooses among those terms, and the chosen lender issues a term sheet and opens underwriting. A term sheet is an invitation to underwrite, not an approval. What it binds the lender to, and what remains open until a commitment, is on term sheet vs commitment letter.

The package is built in a day. The time in an acquisition is spent waiting for reports, consents and the seller's documents, so those are what to start early.

Underwriting and third-party reports: where deals wait

Underwriting is the lender's own work: testing the seller's earnings, building coverage, reading the buyer's credit and experience, and verifying tax returns with the IRS through Form 4506-C. It moves as fast as the answers to the lender's questions. Most of those questions are about the target, so the seller's responsiveness, and the seller's accountant's, sets the pace here. In parallel, the lender orders or requires reports it cannot produce itself:

Each of these runs on the provider's schedule and often needs the seller: site access for an appraiser, records for the valuation, a management interview for the quality of earnings team. From 1 October 2026, SOP 50 10 8.1 also requires financial due diligence on every SBA change of ownership and 1.25x debt service coverage on historical results, so the historical figures get more scrutiny, not less. When a report is required and what the lender reads in it is covered on the SBA business valuation requirement and quality of earnings for acquisition loans.

Commitment, documentation and closing

With underwriting and the reports complete, the lender's credit committee approves the loan and the lender issues a commitment letter; on an SBA loan the lender also issues the loan authorization that sets out SBA's conditions. The commitment is the document to rely on in the purchase agreement. It still lists conditions precedent, and the closing waits for each one. The usual list:

• A final purchase agreement consistent with the terms the lender approved, including the seller note and any standby agreement.
• Loan documents: the note, security agreement and personal guarantees. On SBA loans every owner of 20% or more guarantees.
• Assignment of the premises lease, or a new lease, with the landlord's consent. See lease assignment and the acquisition loan.
• Consents from customers, suppliers or licensors whose contracts change hands. See change-of-control consents.
• Payoff letters for the seller's existing debt and releases of its liens. See paying off seller debt at closing.
• Evidence of the buyer's equity injection and insurance naming the lender.
• A funds-flow statement that matches the sources and uses.

At closing, documents are signed, the lender funds, the seller's lenders are paid off from the proceeds, and the new liens are filed. A working capital true-up follows closing on the schedule the purchase agreement sets.

What actually sets the pace

A buyer cannot make an appraiser arrive sooner or a landlord answer faster, but can start both early. The deals that close cleanly share a few habits:

• The seller's figures are complete at the start. The latest full year, a year-to-date P&L and the debt schedule, before a lender is asked for terms.
• Consents are planned at LOI, not discovered at closing. The lease and key contracts are read early for assignment and change-of-control terms, and buyer and seller agree when each landlord or counterparty will be approached. One who learns of the sale from a closing checklist is a delay.
• Reports are ordered as soon as the lender asks. Not before, because the lender's requirements set the scope, and not after credit approval.
• The seller has one person answering questions. Usually the seller's accountant or broker, with authority to send documents.
• Program rules are settled early. On SBA deals, the standby seller note, the seller's consulting period and the absence of any earnout belong in the LOI.

None of these depends on the lender package, which is ready the day the documents are. They depend on the seller and the third parties, and that is where a buyer's attention should go. The reasons a deal falls out along the way are collected on why acquisition loans get declined.