Buying an HVAC business – how much equity do you need?

SBA loans will finance an acquisition, but the days of “no money down” are gone. Most lenders want to see the buyer put up 10% to 20% of the purchase price, either in cash or seller financing. The 7(a) rules allow the seller to cover up to half of the injection, as long as the note is on full standby for at least two years.

Banks will also require up-to-date tax returns, a balance sheet and cash-flow projections to ensure the business can service the debt. Don’t forget to budget for working capital – the last thing you want after closing is to starve your new company of cash. Negotiate a price based on net operating income, not gross revenue, and insist on seeing the service agreement list.

Finally, understand the culture you’re buying; if half the technicians walk out after the sale, your equity injection will evaporate faster than refrigerant on a July rooftop.