Question 1

What is the true cost of buying a business?

Accepted Answer

The true cost of buying a business goes well beyond the purchase price. Expect to budget for SBA guaranty fees, lender origination fees, legal counsel, quality of earnings reports, business appraisals, environmental assessments, broker fees, working capital reserves, insurance, training costs, and entity formation. These additional costs typically add 15-25% on top of the purchase price.

Question 2

What is an SBA guaranty fee?

Accepted Answer

The SBA guaranty fee is a one-time fee charged on the guaranteed portion (typically 75%) of an SBA loan. For FY2026, loans up to $1M have zero guaranty fee, $1M-$2M pay 0.50%, and $2M-$5M pay 1.05%. This fee can be financed into the loan.

Question 3

What is the Lehman formula for broker fees?

Accepted Answer

The Lehman formula is a sliding scale for calculating business broker fees: 5% of the first $1M, 4% of the second $1M, 3% of the third $1M, 2% of the fourth $1M, and 1% of everything above $4M. For a $2M deal, the broker fee would be $90K (5% of $1M + 4% of $1M).

Question 4

How much working capital do I need when buying a business?

Accepted Answer

A common rule of thumb is to reserve 10-20% of the purchase price as working capital. This covers payroll, inventory, rent, and other operating expenses during the ownership transition. The exact amount depends on the business type, seasonality, and payment terms with customers and vendors.

Acquisition Cost Estimator

Deal Details