You Don't Need $90,000 in Cash to Buy a Local Business: SBA Loans, Grants and How to Tell What a Business Is Really Worth

If a listing for a neighborhood pizza shop, deli or salon at $90,000 has ever made you think “I could do that,” you are not alone. Plenty of people in Milford and West Haven quietly dream of owning the corner business they already love. The first surprise for most of them is that buying an existing business usually does not require walking in with the full price in cash.

The second surprise is that “free grant money” to buy a business mostly does not exist. Below is a plain-English guide to how purchases of small local businesses are actually financed, where to get free help in Connecticut, and how to tell whether an asking price makes sense.

The big one: SBA 7(a) loans

Most bank loans to buy a small business are made under the U.S. Small Business Administration’s 7(a) loan program. A bank or other approved lender makes the loan, and the SBA guarantees part of it, which makes lenders more willing to finance a first-time owner.

The rules changed recently. The SBA’s updated lending rulebook, SOP 50 10 8.1, took effect Oct. 1, 2026. For a first-time purchase of a business, it says:

You must put in at least 10% of the total project cost, meaning the price plus closing costs, working capital and other costs to take over. For an initial acquisition, that 10% cannot be reduced or waived.
A loan from the seller can count toward that 10%, but only up to half of it, and only if the seller agrees to be on “full standby.” That means no principal or interest payments to the seller for the entire life of the SBA loan. The rest has to come from sources like your own savings or a documented gift.
Loans for the business itself, including goodwill and working capital, can run up to 10 years. Equipment is generally limited to 10 years. Real estate can go up to 25 years.
The business’s cash flow must cover the loan payments by at least 1.25 times for an initial acquisition. In other words, lenders want a cushion.

Expect to provide a personal guarantee, your credit history, the seller’s tax returns and a business plan. Not every bank likes very small loans, so ask more than one. The SBA’s free Lender Match tool can connect you with lenders.

Smaller amounts: SBA Microloans

The SBA Microloan program provides loans of up to $50,000 through nonprofit lenders. The SBA says the average microloan is about $13,000, rates are generally between 8% and 13%, and the longest repayment term is seven years.

One important limit: microloans are meant for working capital, inventory, supplies, furniture, fixtures and equipment. They are not designed to pay a seller for a business’s goodwill. They can, however, help a new owner replace an oven or stock the shelves after the purchase.

In Connecticut, SBA-approved microlenders include the Community Economic Development Fund (CEDF) in Meriden, which serves all 169 towns, and HEDCO, Inc. Both are nonprofit community lenders that also offer business advising.

The handshake route: seller financing

In many small sales, the seller carries part of the price and is paid back over time. That tells you something useful: a seller willing to be paid out of future profits believes the business will keep producing them.

Seller financing can be used on its own or alongside an SBA loan. Keep in mind the SBA’s strict standby rule above if you want a seller’s note to count toward your down payment. The down payment, rate, length and what happens if the business struggles are all negotiable. Have your own attorney review it.

Connecticut programs: what’s real

Be skeptical of anyone promising grants to buy a business. The SBA itself states plainly that it “does not provide grants for starting and expanding a business,” according to its grants page. Grants for buying an existing business are rare. Here is what Connecticut does offer:

CT Small Business Boost Fund: Supported by the state Department of Economic and Community Development, it offers loans of $5,000 to $500,000 at a fixed 4.5% rate, with 60-month terms for loans under $150,000 and no origination fees. These are loans, not grants, and must be repaid. The money is aimed at equipment, payroll, rent, renovations and similar costs, and businesses generally must have operated for at least a year. It is better suited to a business you already own than to the purchase price itself. ctsmallbusinessboostfund.org
CT Small Business Development Center (CTSBDC): Free, confidential one-on-one advising, including on buying a business, valuation, financing and negotiation. Request an advisor.
SCORE Western Connecticut: Free volunteer mentors and low-cost workshops. The chapter serves New Haven County, including Milford and West Haven. score.org/ct/western-connecticut
DECD lending partners: The state lists community lenders, including CEDF and HEDCO, on its lending partners page.

What is a small business really worth?

Most small businesses are priced on seller’s discretionary earnings, or SDE. Roughly, SDE is the business’s profit plus the owner’s own salary and certain personal or one-time expenses run through the business, called “add-backs.” It answers a simple question: how much money does this business produce for one full-time owner-operator?

The price is usually SDE times a multiple. According to BizBuySell’s restaurant benchmarks, restaurants sold on its marketplace from 2021 through 2025 went for a median of 1.85 times SDE. The middle half sold between 1.34 and 2.53 times.

Two other things matter a great deal. The first is the value of the equipment, which sets a rough floor on the price. The second is the lease. A great business with a lease that expires in a year, or that the landlord won’t transfer, may be worth far less than its earnings suggest.

Be careful with add-backs and with claims of unreported cash sales. If income was not reported on tax returns, a lender will not count it, and you should not pay for it either. Base your offer on what the tax returns and bank statements show.

An example, using $90,000

This is a hypothetical illustration, not a real deal or a quote. Actual rates and terms will vary.

Say a shop is listed at $90,000, and you expect about $10,000 more in closing costs, legal fees, inventory and starting cash. That makes the total project cost $100,000.

Your required injection: 10% of $100,000, or $10,000. At least $5,000 must be your own money. The seller could cover up to $5,000 with a note on full standby, with no payments for the life of the SBA loan.
The SBA loan: The remaining $90,000. Over 10 years at an assumed 11% interest rate, the payment would be about $1,240 a month, or about $14,880 a year.
The coverage test: At 1.25 times coverage, the business would need to generate at least about $18,600 a year that can go toward that loan payment. Lenders will also want to know you can cover your own living expenses.

Now check the price. If the seller can document $50,000 in SDE, the asking price is about 1.8 times SDE, close to the BizBuySell median. If the paperwork supports only $30,000, the same median multiple points to roughly $55,500, and the price deserves a harder conversation.

For comparison, in a seller-financed deal with no bank, putting $30,000 down and having the seller carry $60,000 at 7% over five years works out to about $1,188 a month.

Your due-diligence checklist

Before you sign anything, ask for and verify:

Three years of business tax returns, matched to bank statements.
Connecticut sales and use tax filings. Under state law, a buyer can be held liable for a seller’s unpaid sales tax unless enough of the price is held back or the state issues a clearance. Ask the Department of Revenue Services about a tax clearance before closing.
The lease: rent, years remaining, renewal options and written landlord consent to transfer it to you.
Health and other permits. Ask the local health department whether a new owner needs a new license and inspection.
The age, condition and ownership of the equipment, including anything leased rather than owned.
Liens. Search the seller’s name for UCC filings and check that the business entity is in good standing using the Connecticut Secretary of the State’s business and UCC search.
Exactly what’s included: the name, phone number, website, social media and delivery-app accounts, recipes, staff, and whether the seller will train you and agree not to compete nearby.

Where to start

If you’re serious, book a free session with a CTSBDC advisor or SCORE mentor before making an offer, then talk to two or three lenders and a business attorney. A few hours of free advice can save you from the most expensive mistake a small-business buyer can make: paying for profits that were never really there.

This article is for general information only and is not legal, tax or financial advice. Program rules change; confirm current terms with the lender or agency before you rely on them.