Rules

The constraints that actually bind a small-business purchase here — financing, seller notes, leases, licenses.

Evergreen page, but rules change. SBA citations are to SOP 50 10 8, effective 1 June 2025. Checked 2026-08-15.

Most buyers need a bank

78% of surveyed buyers expect to use SBA financing (BizBuySell Insight, Q2 2026). A deal that is not shaped for an SBA 7(a) loan is excluding most of its buyer pool before it starts.

The 10% down — SBA rule

On a full change of ownership, the buyer must put in 10% of total project cost (price, plus the fees and working capital the bank counts in the project).
A seller note counts toward that 10% only if it is on full standby — the seller takes no payments for the life of the SBA loan — and even then it can cover at most half of the 10%.
Consequence: many advertised “seller notes” do nothing for the SBA math. Model the note before the first offer, not after.

Worked example (hypothetical): a $400k project (price + fees + working capital). You need $40k in. A seller note can cover at most $20k of that, and only if they take no payments for the life of the SBA loan. A note that starts paying next year does not count. This is the rule applied to a round number, not a quote on any specific deal.

The expectations mismatch is large: 90% of buyers expect seller financing; 29% of owners plan to offer it (same survey).

The bank underwrites tax returns

Listings advertise a cash-flow figure. Lenders underwrite tax returns. Every add-back — extra “earnings” the seller put back in, such as owner salary, one-time expenses, the personal vehicle — has to be evidenced to survive underwriting. The broker’s cleaned-up profit number is not the bank’s number until a lender agrees with it. If the seller will not produce three years of returns, there is no deal to underwrite.

The lease is the deal (food and retail)

In this region, a restaurant or shop purchase is a real-estate transaction wearing a business suit. Before anything else: remaining term, options, the assignment clause, rent as a share of sales, and who the landlord is. A packet without the lease is fiction.

Licenses attach to people

Contractor, health, and care licenses belong to individuals, not firms. Whether the license transfers — and who must personally hold it at close — is a first-order question to answer before a letter of intent, with the relevant board (CSLB, CDPH, CDSS), not something to discover in escrow.

Who is on the other side of the table

46% of buyers are “corporate refugees” (same survey) — first-time operators buying a job that is also an asset, usually with 10% down and an SBA loan. They are not funds and they do not have bankers. Sellers pricing for a sophisticated buyer that does not exist are part of why listings sit for six months.

Sources

SBA SOP 50 10 8 (effective 1 Jun 2025), via lender summaries — equity injection and standby-note rules. Buyer/seller survey figures — BizBuySell Insight Report, Q2 2026. This page is general information, not advice on any specific transaction.