This is an SBA rule change most operators don't know exists.
If you already own an operating business and want to acquire another one, expansion acquisitions deserve a serious look.
This only applies if you already own an operating business. First-time buyers don't qualify. But for existing operators, this rule changes the math entirely.
The Math
Scenario | Purchase Price | Equity Required | Capital Preserved |
|---|---|---|---|
Standard Acquisition | $2,000,000 | $200,000 (10%) | — |
Expansion Acquisition | $2,000,000 | $0 | $200,000 for WC or growth |
Most buyers miss this because they assume SBA always requires cash in. It doesn't — if the structure is right.
Is This For You?
Before going further, a quick filter:
☐ You currently own an operating business
☐ The acquisition target is in the same industry (same 6-digit NAICS)
☐ You're willing to structure identical ownership across both entities
If all three apply, keep reading.
The 3 Requirements
Three boxes must be checked. No exceptions.
1. Same NAICS
The business you own and the business you're acquiring must share the exact same 6-digit NAICS code.
Broad industry overlap doesn't count. A landscaping company (561730) acquiring another landscaping company (561730) qualifies. A landscaping company acquiring a pest control business (561710) does not.
The match must be precise.
2. Same Ownership
Ownership of both entities must be identical. Same owners, same percentages.
If you own 70% of your current business and your partner owns 30%, the acquiring entity needs that same 70/30 split.
3. Co-Borrowers
Both businesses must be borrowers on the loan. They go on together as co-borrowers, sharing the obligation.
Miss any one of these three and you're back to the standard 10% injection.
Same NAICS. Same ownership. Co-borrowers. That's the rule.
What Changed on September 30, 2025
SBA Procedural Notice 5000-872764 removed the geographic proximity requirement.
Before 9/30/25 | After 9/30/25 |
|---|---|
Same NAICS | Same NAICS |
Same ownership | Same ownership |
Co-borrowers | Co-borrowers |
Same geographic area | — |
Previously, the acquisition target had to be in the "same geographic area" as your existing business. That requirement is gone.
If you run an HVAC company in Dallas and find the right target in Houston — same NAICS, same ownership, co-borrowers — you can pursue it under expansion rules.
Out-of-market growth just became more accessible.
This comes directly from SBA procedural guidance, not lender interpretation.
The Process
A simple flow for how this plays out:
Verify NAICS → Confirm ownership match → Pre-clear with lender → LOI → Close
Front-load the NAICS and ownership verification. Discovering a mismatch after you've signed an LOI wastes time and credibility.
Where This Works Best
Expansion acquisitions are particularly relevant for:
Service businesses with consistent NAICS codes across geographies (HVAC, plumbing, electrical, landscaping)
Professional services firms expanding footprint (accounting, engineering, consulting)
Franchise operators acquiring additional units in the same system
Trade contractors rolling up competitors or adjacent-market operators
The common thread: businesses where the 6-digit NAICS code stays constant as you scale.
The Risks You Should Know
This structure works, but it comes with real exposure:
Both businesses are cross-collateralized. If one struggles, the lender has recourse to both.
Personal guarantee still applies. You're on the hook personally, same as any SBA loan. Learn more about PG Insurance (coming soon).
NAICS disputes can kill deals late. If your lender or SBA questions the NAICS match during underwriting, the deal can unwind after you've invested significant time and diligence costs.
You're trading cash-in for balance-sheet risk. These aren't reasons to avoid the structure. They're reasons to verify everything early.
The Bottom Line
If you own a business and want to acquire another in the same industry, expansion acquisition rules can eliminate your equity injection entirely.
Same NAICS. Same ownership. Co-borrowers.
As of September 30, 2025, geographic proximity is no longer required.
Operator Takeaway
The Rule | The Result |
|---|---|
Same NAICS. Same ownership. Co-borrowers. | 0% equity injection required |
This is how operators scale faster than their personal capital would normally allow.
Discuss it with your lender and advisor early — before you're deep into a deal.
For the full guidance:
SBA Procedural Notice 5000-872764 (effective September 30, 2025)
Disclaimer: This guide is for educational purposes only and does not constitute legal, financial, tax, or investment advice. Business acquisitions involve significant risks, and outcomes can vary widely based on individual circumstances. Always consult with qualified professionals including attorneys, CPAs, and financial advisors before making acquisition decisions. The EBIT Community does not guarantee the accuracy of information provided or the success of any acquisition strategy. Past performance and examples do not guarantee future results.
