The underwriting clock decides your outside date

The SBA loan clock does not start when the letter of intent is signed. It starts when the lender treats your application file as complete. Build the outside date backward from the loan closing period, keep exclusivity running with the letter rather than on a short fixed clock, and write the financing condition as approval and funding by a date.

Why do SBA-financed acquisitions die without anyone disagreeing?

SBA-financed acquisitions usually die of calendar, not of conflict. The loan application gets treated as a later step, underwriting and the loan closing period run past the date the seller expected to be done, and exclusivity lapses while the file sits. The seller then reprices, demands a larger deposit, or goes back to the market.

The mechanism is simple. A 45-day exclusivity period tells the seller that 45 days is the deal. Diligence consumes three weeks. The application goes in during week four or five. The credit decision and the loan closing period then run on a schedule no one in the room controls. Day 45 arrives with no funding date, and the extension you must ask for is the seller’s chance to change terms.

The sequencing is the deal term. Price survives a slow deal. Exclusivity does not.

What are the clocks in an SBA 7(a) acquisition, and when does each one start?

An SBA 7(a) acquisition runs on four clocks: prequalification, application filing, underwriting and the credit decision, and the loan closing period that ends at funding. Only prequalification happens before the letter of intent is signed. The other three do not start until the lender treats your application file as complete.

• Prequalification. A lender reviews your resume, your liquidity, and the seller’s financials and issues a term sheet. A term sheet is an expression of interest with conditions attached. It is not approval and starts no clock.
• Application filing. The file becomes complete only when the lender says it is complete. Ask the lender, in writing, for the exact list of items it needs and which must come from the seller. Seller-sourced items are a common delay.
• Underwriting and credit decision. The lender underwrites. An SBA Authorization is the written agreement setting the terms on which SBA guarantees the loan. If an application is denied, reconsideration may be requested within six months, and the applicant must overcome all legitimate reasons for denial. The request goes to the office that denied it, so a lender’s own credit decline is usually answered by moving the file to another lender. Plan around one pass, not two.
• Loan closing period. Approval is not money. Conditions must be satisfied, documents signed, and funds disbursed. SBA guidance as of October 2026 requires 7(a) loans to be fully disbursed within 48 months of approval, after which the undisbursed balance is cancelled. That is an outer limit SBA can change, not your deadline. Yours is shorter, because insurance binders, lien searches, and interim financials go stale.

I build the timetable backward from the funding date, and I write the application deadline into the letter of intent before I write the outside date.

Rules: 13 CFR 120.192 (approval or denial notice); 13 CFR 120.10 (Authorization defined); 13 CFR 120.193 (reconsideration after denial). Stated as of October 2026; confirm current rules and SOP edition with your lender.

Does it matter whether my lender has delegated authority?

Delegated authority decides how many queues your file sits in. A 7(a) lender with delegated authority makes the credit decision itself. A lender without it sends the file to SBA’s Loan Guaranty Processing Center, which handles applications for lenders that cannot approve without SBA action. Ask which applies before you choose a lender.

Standard 7(a) loans may be processed under Preferred Lenders Program delegated authority or non-delegated through the processing center. The regulations set out how a lender obtains delegated authority and what that program requires. Neither route is better in the abstract. They are different timetables, and you are writing dates into a contract.

Treat every number a lender gives you as a current estimate, not a commitment. Lenders and SBA set their own timetables, and volume, staffing, and policy move them. No one can promise you an approval or a funding date.

Rules: 13 CFR 120.440 (how a 7(a) lender obtains delegated authority); 13 CFR 120.450 and 120.452 (Preferred Lenders Program and PLP loan processing). Stated as of October 2026; confirm current processing practice with your lender.

How should the letter of intent handle exclusivity and the outside date?

The letter of intent should tie exclusivity to the life of the letter rather than to a short fixed clock the buyer must ask the seller to renew. The outside date should be built backward from the lender’s loan closing period. A stated termination right should arise if written credit approval has not landed by a named day.

Three drafting moves do the work.

• Exclusivity runs with the letter. Write the no-shop to continue while the letter remains in effect and to end when the letter ends, then give the letter a clean termination mechanism. This cuts both ways: the seller gets an exit too. What you avoid is the scheduled renegotiation a bare 45-day clock creates.
• The outside date is derived, not chosen. Start at the target funding date. Subtract the lender’s estimate for the loan closing period, its estimate for underwriting and credit decision, and the time to assemble a complete file. The date you land on is your application deadline, and it usually falls earlier than a first-time buyer expects.
• Name the financing milestone. “If written credit approval has not been issued by [date], either party may terminate this letter on written notice.” That is a right, not an automatic expiry: someone must give the notice. If you want the letter to end by itself, say it terminates on that date unless extended in writing.

Say which paragraphs are binding. Exclusivity, confidentiality, expense allocation, and governing law normally are. Price and structure are not. If that line is not drawn, it will be argued about later.

Exclusivity that expires on a date you must ask to extend is a repricing event you scheduled yourself.

How do I write a financing condition a seller will actually sign?

A financing condition a seller will sign states an objective event and a date: a lender has issued written credit approval of a loan of at least a stated amount on stated terms, and that loan funds at closing on or before a stated day. Pair it with a covenant to apply promptly and pursue the loan diligently.

The version sellers refuse is the one written as your satisfaction. “Financing satisfactory to Buyer in its sole discretion” reads to a seller, and to a broker, as a free option on the business. The answer is a price bump, a larger non-refundable deposit, or a shorter exclusivity period. You paid for discretion you did not need.

Build the clause from four parts:

• The event. Written credit approval of a loan of not less than a stated principal amount, with a stated maximum interest rate, minimum amortization term, and maximum equity injection. Objective terms let you walk from a loan that is approved but unworkable, without claiming discretion.
• The funding. Approval alone is not the condition. Funding at closing is. Say so.
• The date. One outside date, with a termination right for either party if funding has not occurred, exercised by written notice, and defined consequences for the deposit in each scenario.
• The covenant. The buyer will submit a complete application by a stated date, respond to lender requests within a stated number of business days, not withdraw or materially change the application without the seller’s consent, and report status in writing on a stated cadence.

The covenant is the price of the condition, and it has teeth. Efforts covenants are read as affirmative obligations to take reasonable steps, not merely promises against sabotage, and a party whose own material breach causes a condition to fail is poorly placed to rely on that failure. The leading cases are Delaware public-company decisions, persuasive rather than controlling unless your agreement chooses Delaware law. Read your governing law clause.

Case: Williams Cos. v. Energy Transfer Equity, L.P., 159 A.3d 264 (Del. 2017) (efforts covenants require affirmative reasonable action; termination was upheld there because no material breach was shown).

What does a financing condition cost me as a buyer?

A financing condition is a discount on the buyer’s offer, and a seller comparing bids will price it. The seller carries the risk of coming off the market for months and ending with nothing. That risk returns to you as price, as a larger deposit, or as a shorter outside date.

Pay for it with certainty rather than price. A named lender that has already issued a term sheet is worth more to a seller than a vague promise of financing. So is a short, derived outside date.

What you should not do is drop the condition to win the deal. Holders of at least a 20 percent ownership interest generally must guarantee an SBA business loan, so you are signing personally anyway. A purchase obligation with no financing condition and no loan is personal exposure with no ceiling. That is a hole, not a posture.

Rule: 13 CFR 120.160(a) (personal guarantees). Stated as of October 2026; confirm the current requirement and the current SOP edition with your lender.

A financing condition is a discount on your offer. Pay for it with certainty, not with price.

What conditions will the lender add late, and why do they belong on the checklist now?

Lenders add closing conditions late: insurance certificates naming the lender, landlord consent and a lease assignment, formation and good standing evidence for the buying entity, lien searches and payoff letters for the seller’s secured debt. Each depends on a third party who is not working to your closing date.

Insurance is regulated in part. As of October 2026, SBA’s regulation requires hazard insurance on all collateral for 7(a) loans greater than $500,000, and your lender may require more; confirm the current threshold with your lender. Ask for the insurance requirements in writing when the term sheet arrives, not when the closer sends the final conditions list. Landlord consent carries the least leverage: the landlord has no deadline and no stake in your closing, and the lender may have requirements about the remaining lease term. Start that conversation in week one.

Put every condition on one checklist when the letter of intent is signed, with a named owner and a due date for each line. That turns the lender’s conditions from surprises into assignments.

Rule: 13 CFR 120.160(c) (hazard insurance).

What should I do this week to build the timetable and the clause?

A dated closing timetable starts with four anchors: the date the application file is complete, the target credit decision date, the document delivery date, and the funding date. Get the lender’s business-day estimates in writing for each gap, then set the outside date in the purchase agreement after the funding target, not on it.

• Ask your lender today whether it will use delegated authority here, and for its current estimate, in business days, from complete file to credit decision and from approval to funding.
• Ask for the application checklist and closing conditions list in one email. Mark which items the seller must produce.
• Write the four anchor dates on one page, add cushion after the funding target, and treat every number as an estimate that may move.
• Draft the letter so exclusivity runs with it, with a stated application deadline and a termination right if credit approval has not issued by a named day.
• Draft the financing condition as approval plus funding by a date, with objective loan terms, a diligence covenant, and defined deposit outcomes.
• Open the landlord conversation and request insurance quotes in week one.
• Confirm which edition of SBA’s operating procedure governs. As of October 2026, SOP 50 10 8.1 took effect on October 1, 2026, replacing SOP 50 10 8, and applies to loans receiving an SBA loan number on or after that date. Ask again if your deal runs long.

I ask a lender whether it will use delegated authority before I read a line of the purchase agreement, because that answer sets every date in it.

Policy: SBA Policy Notice 5000-880695, Issuance of SOP 50 10 8.1 (published August 14, 2026; effective October 1, 2026). Stated as of October 2026; SBA revises its procedures, so confirm the current edition with your lender.