The Big Question
How to Buy a Family Business
The Short Answer
Lenders finance family purchases every week, and the retirement wave makes yours the most common succession story in the country. The program's rules ask one question before any other, and it is worth asking yourself now: do you already own a piece of it? Everything about how the deal finances follows from that answer, because the SBA treats a buyout between existing owners and a purchase by a new owner as two different transactions (SOP 50 10 8).
Door One: You Already Own a Piece
A buyout between existing owners can be financed past 90% of the purchase price, up to all of it, with no money down, when two things hold. You certify that you have been actively working in the business with a stake that never shrank for the past 24 months, and the balance sheet shows debt of no more than 9 times its worth, for the last full year and the current quarter both. Fail either test and the fallback is the lesser of two amounts: cash enough to reach that ratio, or 10% of the price.
The planning consequence runs backwards in time: a parent who puts a child on the cap table early, with real duties, is not doing paperwork, they are opening this door. If succession is years away and you hold nothing yet, the cheapest financing move available is becoming a genuine minority owner now. Note that any owner at 20% or more personally guarantees any SBA debt the business carries, so a stake is a commitment, not a gift: the Eligibility Pre-Check walks everything else the file will ask.
Door Two: You Are New to the Cap Table
A child, sibling, or cousin who never held equity buys the family business the way a stranger would: a complete change of ownership, with an equity injection of at least 10% of the total project cost. The family part still helps, in one specific and allowed way: a seller note can cover up to half of that injection when it sits on full standby for the life of the loan, meaning your parent collects nothing on it until the bank is repaid. A parent willing to carry patient paper is often the difference between needing the full injection in cash and needing half of it. The SBA Calculator prices the whole structure, and the seller note and full standby entries define the terms your parent's counsel will want defined.
Price It Like a Stranger's Deal
The number in a family deal carries feelings a stranger's number does not: a parent's retirement on one side, a child's sweat equity on the other, and often siblings watching from the will. The lender cuts through all of it the same way: for transactions between family members the program requires an independent business valuation at any size, precisely because the buyer and seller are close, so the price has to survive a stranger's math no matter what the family agrees. Run the valuation and the underwrite before anyone names a figure at dinner. A price the cash flow supports protects the business; a discount, if the family wants one, should be a decision made on top of a real number, visible to everyone it affects.
The same documents that keep a partnership survivable keep a family deal survivable, and one more matters here: if other relatives stay on the payroll or the lease, write down what they do, what they are paid, and who they answer to now.
When the Family Deal Is the Wrong Deal
Taking over the family business is a career decision wearing a loyalty costume, and it deserves the same cold look as any other path: whether buying fits you at all, and whether this business would clear your own screen if a broker sent it to you. A business that cannot pay you a market salary and service its own purchase debt is not a legacy, it is a liability with a family photo on the wall, and declining it kindly, then helping your parent sell it well, is also a way of taking care of the family.