How to Use an SBA Loan to Buy a Corporate Catering Company

Source acquisition targets through business brokers specializing in food service, direct outreach to catering operators in your target market, or lower middle market M&A platforms. Focus on businesses with $300K–$700K EBITDA, a diversified corporate client roster where no single account exceeds 20–25% of revenue, and documented contract renewal history. Avoid businesses where the owner personally manages all key client relationships with no supporting account management team, as SBA lenders will flag this as a risk to post-close revenue stability.

Once you identify a target, submit a non-binding Letter of Intent outlining your proposed purchase price, deal structure, and due diligence period. Engage a CPA with food service or lower middle market M&A experience to conduct a Quality of Earnings (QoE) review of three years of financials, tax returns, and the owner's add-back schedule. For corporate catering businesses, pay particular attention to food cost consistency, labor cost trends, and any revenue tied to single large corporate accounts that may not transfer. SBA lenders will require this financial clarity before underwriting.

Not all SBA lenders understand the nuances of corporate catering acquisitions — specifically how to underwrite client contract transferability, seasonal revenue patterns, and the goodwill-heavy nature of these deals. Seek out SBA Preferred Lenders (PLPs) or non-bank SBA lenders that have closed food service and B2B catering transactions. Provide them with three years of business tax returns, your personal financial statement, a business plan addressing post-close client retention strategy, and the preliminary QoE findings. Lenders will typically require a DSCR of at least 1.25x on the adjusted EBITDA after your normalized salary.

Conduct a comprehensive due diligence review covering: client contract terms and renewal rights for the top 10 accounts, assignment clauses that allow contracts to transfer to a new owner, health department inspection history and any outstanding violations, food handler and business license transferability, commercial kitchen lease terms and equipment condition, key employee retention risk for executive chefs and account managers, and delivery fleet ownership versus lease status. Engage a food service attorney to review contract assignability and an M&A attorney to structure the purchase agreement with appropriate representations, warranties, and escrow provisions tied to client retention.

Structure the final purchase agreement to align buyer and seller incentives around post-close client retention. A common structure for corporate catering acquisitions includes an SBA 7(a) loan covering 80–85% of the purchase price, 10% buyer cash equity, and a 5–10% seller note on full standby for 24 months. If the seller is requesting a premium valuation based on projected revenue growth, negotiate a partial earnout tied to specific client retention thresholds and revenue targets over 12–24 months post-close. Ensure the seller commits to a 6–12 month transition period to personally introduce the new owner to all key corporate account contacts.

Submit your complete SBA loan package to your preferred lender, including the executed purchase agreement, final QoE report, three years of business and personal tax returns, personal financial statement, management resume demonstrating relevant experience, business plan with client retention strategy, and all lease and contract documents. The lender will order a business valuation — required by SBA for acquisition loans — and conduct their own underwriting review. SBA-preferred lenders can issue a conditional commitment in 30–45 days. Address any lender conditions quickly, particularly around license transfers and lease assignments, as these are the most common closing delays in catering acquisitions.

At closing, ensure all client contract assignments are executed, health permits and food service licenses are transferred or reissued in the new owner's name, commercial kitchen lease assignments are signed by the landlord, vehicle titles and registrations are transferred, and all key employee agreements or retention bonuses are in place. Fund the SBA loan, release seller proceeds, and activate the seller transition plan. Communicate the ownership change to all corporate clients personally — ideally with the seller present — within the first two weeks post-close to protect contract renewal momentum and reassure decision-makers at your largest accounts.