Forty-five days is the number every seller hears and every buyer hopes for. It is also, in my experience, the exception rather than the rule on a fully-structured SBA 7(a) acquisition loan. Sixty to ninety days is closer to reality — and when that gap surprises a seller who signed an LOI with a 45-day closing deadline, deals fall apart over paperwork, not merit.
The fix is not to lowball the timeline in your LOI to win the seller's signature. The fix is to write the LOI so both sides are protected when the inevitable delay shows up.
Why does an SBA acquisition loan take so long in the first place?
The short answer: there are more approval gates on an SBA loan than a conventional commercial loan, and each one runs sequentially, not in parallel.
A simplified timeline looks like this:
- Letter of Intent signed — Day 0
- Loan application submitted to lender — Days 1–5 (if the buyer is prepared; often Days 10–20 if not)
- Lender credit underwriting — 2–4 weeks
- SBA review / authorization — adds 1–3 weeks if the lender is not a Preferred Lender (PLP); PLP lenders can self-authorize, which removes this step
- Third-party reports ordered and returned — business valuation, environmental, commercial appraisal (if real estate is included). Appraisals alone routinely take 3–4 weeks.
- Franchise review or landlord approval (if applicable) — 1–3 weeks
- Closing conditions cleared, docs prepared, closing scheduled — 1–2 weeks
Add those up under favorable conditions and you are at 45–60 days. Add one slow appraiser, one lender request for additional documentation, or one SBA follow-up question, and you are at 75–90 days before anyone made a mistake.
The most common single delay I see: the business valuation. Lenders are required under SBA SOP 50 10 8 to obtain an independent valuation on any change-of-ownership loan where the seller's note plus any earnout exceeds a defined threshold (currently $250,000 in seller-financed exposure, or any deal over $250,000 where the parties are associates). Valuators are backlogged. A three-week turnaround estimate becomes five weeks. The deal does not move until that report is in.
What breaks a deal when the timeline slips?
Three things, in order of frequency:
1. A hard closing deadline in the LOI. If the LOI says "closing on or before [Date 45 days out]," and that date passes without a signed purchase agreement or a mutual extension, a motivated seller may walk — or, worse, use the missed deadline as leverage to renegotiate price. Some sellers re-list the business the moment a deadline lapses. Others simply accept a competing LOI that came in during the delay.
2. No mechanism for extension. The LOI granted exclusivity — that is, the seller agreed to stop marketing the business during diligence. If the exclusivity window expires with no extension clause, the seller is legally free to talk to other buyers. They may not pull the plug immediately, but their obligation to you is gone.
3. The buyer's deposit is too small to create real holding power. A $5,000 good-faith deposit on a $1.2M acquisition does not keep a motivated seller from walking when a cleaner offer appears. The deposit needs to be large enough that forfeiting it is a real consequence for the buyer if they walk without cause — but the LOI also needs to specify clearly what constitutes "cause" for the buyer to exit without forfeiture (namely: SBA loan denial, material adverse change in the business, or findings in diligence that were not disclosed).
What should the LOI say instead?
An LOI for an SBA-financed acquisition should treat the financing timeline as a known variable, not an assumed constant. Here are the specific provisions that matter:
Exclusivity period and extension rights
Set the initial exclusivity window at 60 days, not 45. If the lender is not a PLP lender, consider 75 days. Then add a mutual extension right: either party can invoke a 30-day extension (once, or twice) if the loan is in active underwriting and no material conditions have been defaulted by the buyer. Extension should require written notice — an email is fine — and optionally a supplemental deposit to demonstrate continued commitment.
Financing contingency language
Do not write "subject to financing." Write it specifically:
"This transaction is contingent upon Buyer obtaining a commitment for an SBA 7(a) loan in an amount sufficient to fund the purchase price, on terms acceptable to Buyer in Buyer's reasonable discretion, on or before [Date]. Buyer agrees to submit a complete loan application within five (5) business days of LOI execution and to pursue financing diligently."
The "diligently" language matters. It obligates the buyer to move — and gives the seller recourse if the buyer drags their feet on submitting documents.
Closing deadline vs. commitment deadline
These are two different things, and most LOIs conflate them. A commitment deadline is when the lender issues the conditional approval. A closing deadline is when money changes hands. Separate them. A realistic structure:
| Milestone | Target Date |
|---|---|
| Loan application submitted | Day 5 |
| Lender commitment issued | Day 45 |
| Third-party reports complete | Day 55 |
| Purchase agreement executed | Day 60 |
| Closing | Day 75–90 |
If the commitment deadline slips, both parties know early enough to either extend or make a decision before closing prep dollars are spent.
Material adverse change carve-out
Include a clause allowing the buyer to exit without deposit forfeiture if, during diligence, the business's trailing-twelve-month revenue or EBITDA declines by more than a defined threshold (commonly 10–15%) from the figures on which the LOI was based. This protects the buyer from a business that deteriorates between signing and closing — which matters especially on longer SBA timelines where the diligence window extends across a full fiscal quarter.
What about the seller's side of this?
Sellers — and the brokers or M&A advisors representing them — are not passive in this negotiation. A few provisions that protect the seller when the buyer gets a 90-day SBA loan:
- Incremental deposit increases. The LOI can require the buyer to add to the deposit at Day 45 and Day 60 if closing has not occurred. This separates buyers who are genuinely moving from buyers who are simply holding the business off market while they shop other opportunities.
- Business operations covenants. The LOI should specify that the seller will operate the business in the ordinary course during the exclusivity window — but the seller should resist language requiring capital expenditures or staffing commitments that would only benefit the buyer post-closing.
- Right to accept backup LOIs. On a longer timeline, sellers sometimes ask for the right to accept a non-binding backup LOI from a second buyer, so they have an option if the first deal falls through. Whether a buyer accepts this is negotiable, but sophisticated seller advisors will ask for it.
How does a broker protect both sides before the LOI is signed?
The single most valuable thing a deal intermediary or financing broker can do before LOI is educate both parties on the realistic SBA timeline — not the optimistic one. When a seller hears "45 days" from a broker who knows it will be 75, and then it takes 75, the seller's trust in everyone at the table erodes.
In deals I've worked, the smoothest closings happen when the buyer's financing broker and the seller's M&A broker talk before the LOI is drafted — not after. Fifteen minutes on the phone to align on timeline expectations prevents a renegotiation conversation at Day 46.
Set realistic expectations up front, write them into the LOI, and the extra 45 days becomes a planned feature of the deal rather than a crisis.