How to Buy a Distribution Business: Pricing, SBA 7(a) Financing, and Diligence for Wholesale Acquirers

Buyers want distributors because the cash flow rests on three things you can check: the supplier line card, the customer base, and how well the company manages working capital. If those three hold up after a change of owner, the business keeps earning without the founder in the room.

Two things command a premium. The first is recurring revenue under durable contracts. Capstone Partners named it as the reason fuel distribution traded above other industrials in its April 2026 report, though that finding covers fuel only. The second is value-added service such as fabrication, automation, and technical sales. Those services featured in 2026 platform deals like The Conrad Company, which Incline Equity Partners acquired in September 2026.

Buyers lose money in three places:

• The line card does not transfer. A distribution agreement is a contract with the supplier, not an asset the seller owns outright. If it has a change-of-control or anti-assignment clause, the supplier decides whether you keep the line.
• Inventory is overstated at closing. Slow-moving and obsolete stock sits on the balance sheet at cost. If the purchase price assumes it is saleable, you pay for product you will write off.
• The sector is priced cautiously. GF Data put distribution at 6.0x TTM adjusted EBITDA in H1 2026, its weakest reading in the series, across $10M to $500M TEV private equity deals.

Know who you are bidding against. For a company with a few hundred thousand dollars of SDE, the competing buyers are SBA-financed individuals, search funds, and local strategics, meaning distributors in the same territory that want the customers or the lines. Larger buyers work at a different scale. Private equity sponsors such as Emerald Lake Capital Management, which merged WECS with Electrical Cable Specialists in 2026, are building specialty distribution platforms. Brookfield, a large infrastructure investor, agreed to buy Gregg Distributors for about C$1.6B. Those buyers do not bid against you on a $450,000 SDE company.

BizBuySell's valuation benchmarks for wholesale and distribution businesses sold from 2021 to 2025 show a median of 2.68x SDE, with a lower quartile of 2.00x and an upper quartile of 3.44x. The same sold-business data puts the median sale price at $600,000, median SDE at $236,484, and median revenue at about $1.379M.

Each column was measured on its own. A business at the lower revenue quartile does not automatically sell at the lower-quartile multiple. Use the quartiles to see where a listing sits. Do not read them as a pricing formula.

Worked example: a $450,000 SDE distributor at three multiples

Take a target with $1,800,000 of revenue and $450,000 of SDE. That SDE sits just below the upper quartile. Here is the SDE multiple applied to SDE at each quartile:

The facts that move the multiple within that range are the ones in the section above: supplier agreements that assign cleanly, revenue spread across many customers, and service revenue on top of product margin. No linkable source publishes a lower middle market EBITDA multiple for distribution. Keep the 6.0x GF Data figure out of your SDE math, because it measures EBITDA on far larger deals.

How to read the SDE and add-backs on a listing before you send an LOI

Marketplace and broker listings show each distribution business for sale with an asking price, revenue, and SDE as the seller reports it. Treat that SDE as a claim. Rebuild it yourself before you send an LOI: SDE equals net profit plus one owner's full compensation plus documented add-backs. Then check each line:

• Is more than one owner's salary added back? Only one counts. A second working owner is a cost you will have to replace.
• Does every personal expense have a receipt and a clear business-account trail?
• Does a "one-time" expense show up again in the prior year's return?
• Are inventory write-downs or equipment purchases added back? Equipment is a capital item. It comes off the price, never out of SDE.

Ask the seller's representative for the add-back schedule with support before you price an offer. Then compare the listing against the distribution valuation multiples and the guide to which add-backs a buyer will accept.

You finance it with an SBA 7(a) loan under SOP 50 10 8.1, which applies to loans numbered on or after October 1, 2026. Distribution is SBA-eligible. These are the rules that shape the deal:

• Loan size and term: up to $5M. SBA guarantees 75% of loans above $150,000. The business acquisition portion amortizes over no more than 10 years.
• Rate cap: on variable loans above $350,000, the maximum is the base rate plus 3.0%. With WSJ prime at 7.00% since September 17, 2026, that cap is 10%.
• Equity injection: 10% of total project cost on a complete change of ownership. Up to half can be a seller note on full standby for the life of the loan, documented on SBA Form 155, so 5% buyer cash plus a 5% standby note is common. Interest on the standby note may accrue and is paid after the 7(a) loan is repaid. Advisory and agent fees you pay do not count toward the injection. The lender verifies your cash with bank statements showing the funds for at least 30 days.
• Debt service coverage: SBA requires at least 1.25x for an acquisition. The lender divides EBITDA by total post-closing debt service, using the last fiscal year or a two-year average. Projections cannot be used to meet the minimum. Debt service excludes a standby seller note. The 1.15x minimum applies only to a Business Expansion, meaning a distributor you already own buys another company in the same industry group.
• Valuation: above a $350,000 business purchase price, the lender must order an independent valuation from a Qualified Source (ASA, CBA, ABV, CVA, or BCA). Total acquisition debt, meaning the SBA loan plus any seller debt not on full standby, cannot exceed that valuation.
• Quality of earnings: required when the business purchase price is $3,000,000 or more.
• Guarantees and collateral: anyone owning 20% or more personally guarantees the loan. If business assets do not fully secure it, the lender takes a lien on equity in your personal real estate.

Inventory is part of total project cost, so the stock you buy at closing raises both the loan and your 10% requirement.

Worked example: the median-priced target

The target has $450,000 of SDE priced at the 2.68x median: $450,000 times 2.68 is $1,206,000. For simplicity, treat the price as the whole project cost. In a real deal, closing costs, the SBA guarantee fee, and working capital raise it.

1. Minimum injection: 10% of $1,206,000 is $120,600.
2. Standby seller note at 5% of $1,206,000: $60,300. That is the most the note can contribute toward the injection.
3. Your cash: $100,000. That clears the $60,300 minimum that must come from unlimited sources.
4. Total equity: $100,000 plus $60,300 is $160,300, which is above the $120,600 minimum.
5. SBA loan: $1,206,000 minus $160,300 is $1,045,700. That is above $350,000, so the variable rate cap is 10%.

A price over $350,000 triggers the independent valuation, and the price is below the $3,000,000 QoE threshold. For the coverage test, the lender starts from EBITDA, which is the $450,000 SDE minus a market-rate salary for a manager to replace you. It divides that figure by the annual payment on the SBA loan. The standby note stays out of debt service. Run the payment and coverage in the SBA loan calculator, then test other prices in the acquisition calculator.

Trucks, forklifts, and racking can be financed inside the 7(a) loan or separately. SBA caps equipment maturity at 10 years unless the asset's useful life is longer, so ask the lender which structure keeps you above 1.25x on historical EBITDA.

Diligence on a distributor comes down to whether the margin, the supplier lines, and the inventory survive the change of owner. Here is the trade-specific list:

1. Cash proof. Tie tax returns to the P&L and the P&L to bank deposits for the trailing twelve months and the last two fiscal years. That is the same test SBA requires in a quality of earnings report at $3,000,000 and up.
2. Gross margin by supplier line and by customer. Blended margin hides a top customer on a thin price or a line that loses money after freight.
3. Supplier rebates and volume incentives. Check whether they are written into the agreement or granted at the supplier's discretion, whether they depend on volume that may fall, and whether they are tied to the owner personally.
4. Every distribution agreement. Read the term, exclusivity, territory, termination rights, and assignment or change-of-control clauses. With the seller's consent, meet the top suppliers before closing, not after.
5. Supplier credit terms. Payment terms granted to the seller do not carry over automatically. A new owner can be put on shorter terms, which ties up more cash.
6. Customer concentration and contracts. Know who buys, whether they are under contract or ordering purchase by purchase, and which salesperson holds each relationship.
7. Inventory. Get the aging report, the valuation method, and a list of slow-moving and obsolete stock. Schedule a physical count close to closing.
8. Receivables aging. Old receivables belong in the price negotiation, not in the working capital you buy.
9. Fleet, forklifts, racking, and warehouse systems. Replacement or deferred spending is a capital item. Take it off the price. Do not reduce SDE or EBITDA for it before applying the multiple.

If the business purchase price is under $3,000,000, SBA does not require a QoE. You can still order one, and the lender may review a buyer-ordered report through a qualified vendor, as explained in what a quality of earnings report covers.

When you buy a wholesale business, five terms decide whether what you bought keeps working after closing: the licenses, the warehouse lease, the inventory mechanism, the non-compete, and the seller transition.

Licensing transfer

Which licenses you need depends on what you distribute. A food distributor that holds food for consumption in the US must register its facility with FDA. When the owner changes, the former owner must cancel the registration within 60 days and the new owner must file a new one, under 21 CFR 1.225 and 1.234(b). An alcohol wholesaler needs a federal basic permit under 27 CFR 1.22, and that permit cannot be sold or transferred. Under 27 CFR 1.44, if someone acquires control of the permit holder, the permit terminates after 30 days unless a new application is filed within that window. File before closing so the business never operates without a permit. Resale certificates and sales tax permits are issued by each state. Pharmaceutical and fuel distribution have their own federal and state rules, so map them before you sign the LOI.

Warehouse lease

Get the landlord's consent to assignment, or sign a new lease, as a closing condition. The remaining term should cover the period you need to repay the SBA loan.

Inventory true-up

Set the price assuming a target level of saleable inventory, then adjust it up or down after the closing count. Excluding obsolete stock from the definition keeps you from paying for product you cannot sell.

Non-compete

The seller's non-compete should match the territory in the supplier agreements and cover soliciting customers and key salespeople.

Seller transition

Write the transition into a separate consulting or transition agreement that lists the duties: introducing you to each key supplier, visiting top customers, and handing over pricing knowledge. A standby seller note pays the seller nothing for the life of the 7(a) loan. Any payment that keeps the seller engaged therefore has to come from that agreement, so negotiate its fee and duration with your SBA lender involved before closing.

Munera Capital's Acquisition Launch sources off-market deals for buyers and introduces them to lenders. It works with companies from $1M to $30M in enterprise value. Off-market matters in distribution because a listed company has already shown its supplier list and margins to every buyer who downloaded the teaser.

Here is how the process works. When a seller engages Munera, the business is never listed publicly. Its profile goes only to buyers who have signed an NDA and been vetted for capital and fit, and the buyer sees a blind profile until qualified. If a business matches one of Munera's active buyer clients, the buyer pays Munera's fee. Under SOP 50 10 8.1, advisory fees you pay do not count toward your equity injection, so budget for that fee on top of the 5% cash minimum.

Munera has closed more than $200M in transactions, works with a network of more than 4,000 buyers, holds more than 1,000 owner conversations a month, and covers all 50 states. Before your first call, run your cash and target SDE through the acquisition calculator so Acquisition Launch can start with a price range your SBA lender will finance.