Which costs belong to the business and property decisions?
Start with the actual agreements, asset list, property records, operating needs, and other project costs. Separate the business price from the shop and from cash needed to operate. A single combined asking price does not establish which financing use each dollar supports.
Use the valuation hub to connect that work to the purchase model. The parties need supported value and cost records before choosing the sources. Program limits do not supply an appraisal, accepted allocation, or credit decision.
A coordinated business-and-shop funding plan shows which source funds each use. Link those uses to the proposed lender, CDC, borrower, records, and timing. Use the plan to track the joint review. It does not make a cost eligible or prove that both sources will close.
What does the 2026 combined-limit announcement say?
The SBA's May 18, 2026 announcement describes qualified borrowers combining 7(a) and 504 financing for up to $10 million under its stated policy. It identifies a July 4 effective date and a sequence for borrowers securing 7(a) first.
Review the current rules, existing loans, and intended sequence with the lender and CDC. The announcement has conditions. It does not supply every program detail. A borrower with existing loans needs a supported review of the relevant balances and rules.
Keep the individual loan tests separate. The 7(a) overview and current program policy retain the individual Standard 7(a) maximum of $5 million. The combined announcement does not turn that loan into a single $10 million acquisition facility.
Which uses belong in the 504 review?
SBA's 504 overview describes long-term financing for major fixed assets through CDCs working with a senior lender. Eligible uses and borrower conditions need actual review. The page identifies restrictions including working capital and inventory.
Separate building or land costs and relevant long-lived equipment from business value, goodwill, operating funds, and other costs. Ask the CDC and lender what is eligible in the actual proposal. Do not assign the full acquisition price to 504 simply because some acquired assets are fixed.
The program also addresses operating-business eligibility and excludes specified passive or speculative activities. Review the real property use and borrower structure. A seller's shop ownership does not by itself establish that the buyer's proposed arrangement qualifies.
How should the cost register support both lenders?
Create a use-by-use register with the source documents attached. Identify which values are negotiated, appraised, quoted, or still estimated. The business agreement and property agreement should be clear about what the buyer acquires and what remains with the seller.
| Use or condition | Supporting record | Coordinated funding question |
|---|---|---|
| Business price | Agreement and valuation records | Which source supports the purchase? |
| Owner-occupied property | Property agreement, use and appraisal | What fixed-asset treatment is supported? |
| Equipment | Asset list, condition and cost records | What use and value may be accepted? |
| Operating funds | Actual cash needs and collection timing | Which permitted source funds operations? |
| Existing exposure | Current debt and program records | What limits and conditions apply? |
| Other costs | Actual quotes and project records | Where does each eligible use belong? |
| Closing sequence | Lender and CDC plan | What must occur before funding? |
The quality-of-earnings guide supports the business financial review. Keep that earnings analysis separate from the property's appraisal. Neither establishes the complete coordinated financing outcome on its own.
What can a simple sources-and-uses example show?
Consider an illustrative proposal, with no real target data. Assume a $3 million business price, a $1.8 million shop price, and $200,000 of operating funds. Those selected uses total $5 million before fees and any other costs.
A balanced model still needs a supported source for each use. The presence of a building does not make the operating funds eligible for 504. Nor does a combined limit prove that the business price or proposed loan amount is accepted.
Replace the assumptions with actual appraisals, agreements, eligible costs, and lender responses. This example does not prescribe loan percentages, buyer equity, interest rates, or a guaranteed package. It shows why uses should be classified before source totals are treated as committed funding.
What happens to the business equity and diligence tests?
The lender still must classify the actual purchase under current 7(a) ownership-change rules. It must review the defined price basis and required equity. Valuation, QoE where applicable, and repayment are separate tests. Buying the shop does not remove them.
The add-back guide helps review proposed earnings changes. Keep rent, property debt, owner compensation, and other adjustments tied to the actual structure and supported treatment. Do not assume buying the shop turns every reported rent payment into free cash for business debt service.
Use the working-capital guide to review closing balances. The operating forecast also needs payroll, parts, collections, and other cash timing. Sufficient minimum contribution does not prove that the business can fund its first months after closing.
Who coordinates the entities, collateral, and documents?
Identify the operating borrower, property structure, lender, CDC, and other parties in the plan. Ask advisers how their requirements fit together. Each lender may need an entity diagram. Check that those diagrams agree on the actual structure.
Match the purchase agreements, appraisal, asset lists, financing conditions, and relevant collateral records. Ask which documents or responses each source needs and who obtains them. The buyer needs a practical path to funding, not only two term sheets with attractive headlines.
Use the asset purchase agreement definition to connect the funding plan to the transaction documents. Counsel should review the actual transfer and duties. Financing approval does not itself complete asset title, licensing, customer consent, or other closing work.
What timing dependencies need to be visible?
Record each source's required sequence, accepted proof, planned funding date, and open condition. Confirm how the business and property closings depend on each other. The plan can still have different review and document steps. Ask when each source may disburse funds.
Ask the lender and CDC to explain any permitted interim arrangement or alternative timing. Use their actual response in the cash model. Do not assume temporary funds are available or that the seller will accept a delayed portion without agreed terms.
Keep the amount and timing of each source separate. A promised total may not cover costs due before disbursement. The buyer should understand what cash is available at each step and what happens if one source remains pending.
How does the buyer compare alternatives fairly?
Compare the accepted uses, buyer cash, debt payments, fees, conditions, and timing using actual proposals. Buying only the business with a lease creates one set of duties. Buying the property creates another. Do not treat the same rent, property cost, or debt as though both structures apply at once.
Distinguish an advertised program feature from the lender's quoted terms. If a rate, fee, or cost is still unknown, label it and obtain the relevant proposal. This guide does not supply a current interest quote or universal financing percentage.
Review the property's operating costs and maintenance separately from business earnings. A supported plan can show both sources of cash demand without counting an internal rent transfer twice. Have the CPA and financing team explain the final treatment.
What sequence supports a coordinated closing decision?
- Separate business, property, equipment, operating, and other project uses with source records.
- Confirm current program conditions, borrower eligibility, existing exposure, and applicable sequencing.
- Obtain the lender and CDC review of eligible uses, equity, value, repayment, and documents.
- Reconcile the accepted terms and timing to cash needs and the purchase agreements.
- Track unresolved conditions and confirm actual funding before relying on the closing plan.
Keep the coordinated file with the accepted agreements and lender responses. The useful result is a supported funding plan for distinct uses, with visible limits and dependencies. It lets the buyer consider business and shop financing without turning a combined program headline into a promise of available credit.