Most searchers start looking at deals before they are ready to buy one.
They browse BizBuySell. They sign up for broker newsletters. They request CIMs on businesses they cannot afford to close. They spend months in conversations that go nowhere because they have not done the foundational work that makes a deal closeable.
The result is wasted time, frustrated brokers, and a growing sense that the whole thing is harder than it looked.
It does not have to work that way.
The searchers who close deals efficiently in 12 to 18 months rather than three years almost always did the same thing before they started looking: they got ready first. They built their acquisition criteria, got their finances in order, formed their entity, and lined up their SBA pre-qualification before they ever called a broker.
This checklist is what that preparation looks like. Fourteen items. Work through them before you look at a single deal and you will be in the top 5% of buyers in any conversation you have.
Brokers talk to dozens of buyers every week. Most of them are not serious. They are curious, they are early, they are not yet bankable.
A broker who gets a call from a buyer who has already done SBA pre-qualification, has a defined acquisition criteria document, has a legal entity formed, and has a clear equity injection plan treats that conversation completely differently. You get called first. You get details on deals before they hit the market. You get the broker's honest opinion on whether a deal is right for you because the broker believes you can actually close.
Preparation is not just personal readiness. It is market positioning.
1. Complete your personal financial statement
The SBA requires a Personal Financial Statement (SBA Form 413) from every borrower. It documents your net worth, liquid assets, real estate, investments, and personal liabilities. Most lenders will ask for this in the first conversation.
Fill it out now, before you need it. Knowing your own numbers what you actually have available for equity injection, what your personal debt load looks like, what your net worth is changes how you evaluate deals. A business priced at $2.5M with a 10% equity injection requirement needs $250K from you. If you have $200K liquid, that math does not work. Know this before you fall in love with a deal.
Action: Download SBA Form 413 and complete it fully. Update it every six months.
2. Check your personal credit score
SBA lenders generally want a personal credit score above 680. Below that, you will face significant headwinds getting approved. Above 720 and you are in strong territory.
Pull your credit report now. If there are errors, dispute them the process takes 30 to 60 days. If your score is lower than you expected, understand what is driving it and start addressing it. A late payment from 18 months ago affects you differently than a collections account from last year.
Action: Pull your full credit report at annualcreditreport.com. Review for errors and understand your score.
3. Identify and document your equity injection sources
The SBA requires buyers to contribute 10 to 30% equity toward the acquisition. Where that money comes from matters to lenders they want to see that it is seasoned (in your accounts for at least 90 days), documented, and sufficient.
Common sources include: personal savings, ROBS (retirement funds rolled into a C-Corp), home equity or HELOC, gifts from family with a gift letter, and co-investment from an independent sponsor.
Map out every source you can access. Be honest about what is liquid now versus what is accessible with lead time. An SBA lender will ask you to document all of it.
Action: List every equity source available to you with the approximate amount and how quickly it can be accessed.
4. Understand your SBA borrowing capacity
SBA loans for business acquisitions are sized based on the business's ability to service the debt not your personal income. But your personal financial picture still matters. Lenders look at your debt-to-income ratio, your existing personal obligations, and whether you have prior bankruptcy or tax liens.
Get a preliminary sense of your borrowing capacity before you start looking. Many SBA lenders will do a quick pre-qualification call at no cost. Use this time to understand what deal size is realistic for your financial profile not what you wish you could buy.
Action: Contact two or three SBA acquisition lenders for an informal pre-qualification conversation. Ask them what deal size they would be comfortable financing given your current financial position.
5. Resolve any federal tax liens or legal issues
The SBA will not finance an acquisition for a borrower who has outstanding federal tax liens, unresolved federal judgments, or is under indictment. These are hard stops.
If you have any of these issues, they need to be resolved before you apply and before you invest significant time in a deal that cannot close.
Action: Confirm you have no outstanding federal tax liens or judgments. If you do, consult a tax attorney or advisor before proceeding.
6. Define your acquisition criteria in writing
Most searchers have a vague sense of what they are looking for. A few write it down. Almost none treat it as a living document they refine based on what they see in the market.
Your acquisition criteria document should answer these questions specifically:
Be specific enough that when a broker calls you with a deal, you can say yes or no in five minutes based on the criteria alone.
Action: Write a one-page acquisition criteria document. Share it with every broker you speak to.
7. Get SBA pre-qualified with at least one lender
Pre-qualification is not the same as loan approval it is a preliminary assessment of whether your financial profile and deal parameters are financeable. Most SBA lenders can give you a pre-qualification letter within a week of receiving your financial information.
Having this letter changes every broker conversation you have. You are no longer a buyer who might be able to close. You are a buyer who a lender has already looked at and said yes to in principle.
Action: Pursue SBA pre-qualification with at least one acquisition-focused lender before you begin actively searching.
8. Understand DSCR and what it means for deal selection
Debt Service Coverage Ratio (DSCR) is the metric SBA lenders use to determine whether a business can service the acquisition loan. Most lenders require a minimum DSCR of 1.25 meaning the business generates 25% more cash than needed to cover the annual loan payment.
Understanding DSCR before you look at deals prevents you from wasting time on businesses that look attractive but cannot be financed with an SBA loan. A business with $400K EBITDA asking $3M at SBA rates might have a DSCR below 1.25 even before you account for your own compensation.
Action: Learn how to calculate DSCR for an acquisition target. Ask your SBA lender to walk you through the calculation for a hypothetical deal at the size you are targeting.
9. Decide on your entity structure
Most searchers acquire businesses through a newly formed LLC or C-Corp. The entity structure you choose has tax implications that follow you for years both in terms of how the acquisition is structured (asset sale vs stock sale) and how you take compensation from the business post-close.
The entity decision is not complicated, but it should be made with the input of a CPA or tax attorney who understands business acquisitions not general small business tax advice. A few hundred dollars spent getting this right at Phase 01 can save tens of thousands in taxes post-close.
Action: Consult a CPA or tax attorney on entity structure. Form your entity before you start making offers.
10. Form your legal entity
Once you have decided on structure, form the entity. This is a practical step that takes a week and costs $100 to $500 depending on your state.
You will need an EIN (Employer Identification Number), a registered agent, and a business bank account. Most lenders and sellers want to see a legal entity before they take you seriously as a buyer. An offer made by "John Smith personally" is less credible than an offer made by "Smith Acquisition Group, LLC."
Action: File your entity formation documents in your state. Get your EIN from the IRS. Open a business bank account.
11. Open a dedicated business bank account
Separate from your personal accounts, you need a business bank account in the name of your acquisition entity. This is where your equity injection funds should be seasoned moved here at least 90 days before your expected close date so lenders can document the source.
It also signals seriousness. A buyer who already has a business bank account is a buyer who has done the work.
Action: Open a business checking account in the name of your entity. Begin moving equity injection funds here if your timeline allows.
12. Build your advisory team before you need them
The searchers who close deals quickly have their advisors lined up before a deal is on the table not scrambling to find an M&A attorney when they are 10 days into exclusivity.
Your core team should include:
None of these need to be on retainer. You need to know who you are calling when the deal comes.
Action: Identify one of each. Have at least one conversation with each before you need them.
13. Establish broker relationships in your target markets
Brokers control deal flow. The best deals the ones with clean financials, motivated sellers, and reasonable valuations go to buyers the broker knows and trusts before they hit the market.
You build that trust through consistent, professional engagement before you need a deal. Introduction calls, follow-up emails, sharing your criteria document, and responding promptly to every CIM a broker sends even if it is not right for you.
Most searchers make the mistake of treating broker relationships as transactional. The ones who close do the opposite.
Action: Identify 10 to 15 brokers in your target market and geography. Schedule introduction calls. Send your criteria document. Follow up quarterly.
14. Begin CEO coaching or ETA peer group engagement
The identity shift from employee to owner is real and often underestimated. The decision-making framework that made you successful as an employee deferring to a manager, avoiding personal financial risk, optimizing for certainty works against you as a buyer.
CEO coaching helps you develop the decision-making habits, risk tolerance, and leadership presence you will need before close not after. ETA peer groups connect you with searchers who are one to two phases ahead and can tell you what they wish they had known.
Neither of these is a nice-to-have. They are preparation for one of the biggest financial and professional decisions of your life.
Action: Identify a CEO coach with ETA or owner-operator experience. Join at least one ETA peer group or community before you start actively searching.
When you have worked through all 14 items, you are genuinely ready to search. Not theoretically ready ready in the way that makes brokers take you seriously, lenders approve you efficiently, and sellers believe you can close.
The next step is building your deal sourcing system: your broker outreach list, your direct seller outreach strategy, and your deal evaluation framework. Those are Phase 02 activities and they are dramatically more effective when Phase 01 is complete.
Five Experts members have access to the full Phase 01 Preparation Checklist inside their dashboard interactive checkboxes, progress tracking, and direct links to the Phase 01 experts who can help you complete each item.
Ready to start your search properly? Join Five Experts →
Five Experts connects acquisition searchers with vetted expert advisors across every phase of the ownership lifecycle from pre-search preparation through post-close value creation and exit.
