Buying the building with the business vs leasing it from the seller

What changes when the building is in the deal

In a business acquisition that includes the real estate, the buyer pays for two assets: the operating business, most of whose value is usually goodwill, and a building with its own appraised value. A 7(a) loan can finance both in one loan up to $5 million, with each piece given its own maturity and the loan's term set as a blend of the two. Real estate can run up to 25 years; goodwill and working capital up to 10. From 1 October 2026, under SOP 50 10 8.1, change-of-ownership loans amortize over no more than 10 years except the real estate share, so the building is the one part of an acquisition that can still be stretched.

Where the combined amount would push past the 7(a) limit, the building can go into an SBA 504 instead: typically 50% from a bank, 40% from a Certified Development Company and 10% from the borrower, with a fixed rate on the CDC's share. Since July 2026 the 504 and 7(a) limits are counted separately, so a 7(a) for the business and a 504 for the building can together finance a deal neither could alone.

To finance the building under either program, the business must occupy at least 51% of an existing building. The rest can be leased to tenants.

Side by side

Why a bigger loan can mean a lower blended payment

Ignore interest for a moment and look only at principal. Every 100 borrowed over 10 years must be repaid at 10 a year. Every 100 borrowed over 25 years is repaid at 4 a year. Adding a building to the loan adds debt that pays down far more slowly.

The combined loan is a third larger, but the principal due in year one rises only from 270 to 306, and the rent line disappears from the P&L. The lender adds back the rent the business was paying on the building it is now buying and substitutes the debt service on the real estate portion. Where the seller has been paying market rent to themselves, that swap often improves debt service coverage. That matters under the SBA's coverage floor of 1.15x, and more so from 1 October 2026, when a change of ownership must show 1.25x on historical results.

The trade is cash at closing, 400 against 300 in the illustration, and a longer loan. If the blended maturity comes to 15 years or more, SBA's prepayment fee applies to prepaying more than 25% in any of the first three years: 5% of the prepaid amount in year one, 3% in year two and 1% in year three. A buyer who expects to sell or refinance early should model that too.

If you lease: the lease becomes part of the credit

A lender financing a business it cannot move needs to know the business can stay where it is for as long as the loan is outstanding. When the seller keeps the building, the new lease is signed at closing, which is the buyer's best chance to get it right. Lenders commonly look for:

• Term: a remaining term, including renewal options the tenant controls, at least as long as the loan.
• Market rent: a rent the lender can defend. If the seller has been paying below-market rent or none, the lender underwrites the new rent, not the old one, and the business's coverage falls accordingly.
• Assignment and lender rights: a collateral assignment of the lease to the lender, the landlord's consent to it, and notice and cure rights if the tenant defaults.
• Access to collateral: a landlord waiver letting the lender reach equipment and inventory on the premises.
• No termination on sale: the lease survives a sale of the building, so a new owner cannot end it.
• Purchase option or right of first refusal: not always required, but it lets the buyer acquire the building later, when refinancing is easier.

The seller staying on as landlord does not conflict with SBA's rule that, in a complete change of ownership, the seller may not remain as an owner, officer or employee (the seller may consult for up to 12 months, or up to 24 months under SOP 50 10 8.1 from 1 October 2026). What lenders watch is whether the lease terms are arm's-length. See why the landlord lease matters.

What the seller usually wants

Sellers split into two camps. Some want a clean exit: all cash at closing, no ongoing relationship with the business, and no role as landlord to a buyer who may call about the roof. For them, selling the building with the business is the point, and a buyer who will not buy it may lose the deal.

Others see the building as their retirement income. Rent from a tenant they know, secured by a long lease, can be worth more to them than a lump sum, and they may prefer to defer a sale of the property for their own tax reasons. For these sellers, a lease with a purchase option can bridge both sides: the buyer finances a smaller deal now and buys the building later. A retiring owner often falls into this camp.

If you do not buy the building, a long lease with renewals is not a detail. It is part of what the lender is lending against.

Rules that apply when the building is included

• Business valuation: where the amount financed, less appraised real estate and equipment, exceeds $250,000, SBA requires an independent business valuation. The building is appraised separately and does not count toward that test.
• Quality of earnings: from 1 October 2026, a quality of earnings report is required on acquisitions of $3 million or more excluding real estate. Adding a building does not by itself trigger one.
• Who holds the building: many buyers hold the property in a separate entity that leases it to the operating company. SBA allows this through an eligible passive company; see propco and opco structures.
• Documents: the SBA file (business and personal tax returns for 2–3 years, P&L, year-to-date P&L, balance sheet, debt schedule, a PFS for each 20%+ owner), the target's latest full year of figures, the letter of intent, and for the property, the purchase terms and any existing leases to other tenants.

Transparent models both versions of the deal, with and without the building, in the financing model, so the buyer and seller can see the cash, payment and coverage each produces before the letter of intent is final.