Q2 Business-for-Sale Market Cools as Buyers Assess Tariffs, SBA Lending Concerns

Business-for-sale transactions slowed modestly in the second quarter of 2025, with sale prices trending lower and demand shifting in favor of buyers, according to BizBuySell, which tracks and analyzes U.S. business-for-sale transactions and sentiment from business owners, buyers, and brokers.

A total of 2,342 businesses changed hands in Q2 2025, down 4% from the same period last year, when easing inflation, stronger-than-expected 2.8% GDP growth, and heightened buyer confidence pushed transactions to a multi-year high.

This momentum continued into early 2025—until the Trump administration’s sweeping tariff announcements triggered uncertainty and slowed deal activity. Transactions are now just 1% lower than last quarter, as the market continues to adjust.

“The uncertainty around how tariffs will impact businesses that rely on imported products and how that affects the financial performance is causing buyers to hesitate,” said Dustin Zeher of Horizon Business Brokers, LLC.

At the same time, small business owners are grappling with dual pressures of elevated inflation and newly imposed tariffs driving up costs. Nearly half of surveyed owners (46%) report that tariffs have increased their costs, while 55% say inflation has yet to ease. In response, 66% have raised prices, though customer reactions are mixed.

“Some customers understand market pressures. Others struggle with the higher prices compared to what they paid in the past,” said Drew Vennemeyer, owner of Dwell Construction in Ohio.

This higher-cost environment appears to be impacting deal size. Q2’s completed deals generated $1.9 billion in total enterprise value, down 4% year-over-year and 6% from Q1, driven in part by a shift toward smaller transactions. The median sale price fell 6% year-over-year to $352,000, while median cash flow declined 2.6%. Median revenue held steady.

Meanwhile, 68% of small business owners say their customers are becoming more selective, focusing on essentials and cutting back on discretionary spending. These headwinds are prompting some to delay hiring, scale back growth plans, or postpone expansion efforts.

Changes to SBA Lending Rules Complicate Deals

New SBA lending rules are weighing on the business-for-sale market, rolling back Biden-era policies. Aimed at reducing lender risk, the updated rules impose U.S. citizenship requirements, stricter credit checks, and tighter debt service coverage ratios for small business acquisitions loans.

Furthermore, the SBA has added new rules for down payment requirements, which is critical, particularly for buyers planning to use seller financing as part of their equity injection. Effective June 1st, SBA rules only allow seller notes to cover up to 50% of the buyer’s required equity injection, which is typically 10% of the total project cost.

When used this way, sellers cannot receive any principal or interest payments until the SBA loan is fully repaid, often over a 10-year term. This forces buyers to contribute more capital to the table and effectively turns the seller note into a zero-interest, unsecured loan for the life of the SBA loan.

“SBA lending has become a real challenge with new federal regulations regarding seller notes to be on full standby,” said Mark Kincannon of Resolution Equity Partners.

Further complicating deals, any seller retaining even a small equity stake must personally guarantee the entire SBA loan for at least two years. In addition, all partial ownership transfers must now be structured as stock sales, rather than asset sales, bringing new tax and liability implications for sellers.

These heightened risks add strain to an already significant disconnect between buyer demand for seller financing and seller willingness to offer it. Just 23% of surveyed owners plan to provide seller financing, while 62% of buyers expect it to be part of the deal.

These changes are already being felt. Forty-one percent (41%) of business brokers surveyed reported delays caused by new SBA policies. Supporting that trend, the average time on market for businesses sold in the second quarter increased by 12 days year-over-year.

With more complex requirements, deal structure has never been more critical. Sellers should work closely with their business broker or sales team to navigate these changes. For example, seller repayment restrictions generally don’t apply when the seller note is in addition to the buyer’s down payment, rather than part of it. Lenders are often more favorable toward deals where the buyer meets the equity injection independently and the seller contributes additional financing as a sign of confidence.

For buyers using SBA financing, preparation is essential. While 68% of surveyed buyers say they are considering an SBA loan, more than half (55%) are unaware of the recent changes. Savvy buyers should get prequalified with a lender and be ready to move quickly when a viable opportunity arises.

Buyers Compete for Recession-Resistant Businesses in a Changing Economy

Even as consumers cut back on spending, business buyers are actively seeking opportunities in industries that offer stability during economic downturns. Essential businesses with loyal customers and consistent cash flow have become prime acquisition targets, often commanding multiple offers and strong sale prices.

BizBuySell survey data reflects this trend with 73% of business buyers prioritizing recession-resistant businesses, and 64% focusing specifically on service-based companies.

“Buyers are competing for the best businesses, and they sell pretty quickly for premium prices now. However, there are still plenty of mediocre businesses priced unrealistically that buyers will take a pass on,” said Lee Sheaffer, CBI of BizReady, Inc.

The buyer pool is also evolving. As job security weakens, more professionals are entering the market as “corporate refugees” - former employees seeking control over their careers through business ownership. Nearly 45% of buyers now identify as corporate refugees, up from 36% a year ago. An additional 15% identify as unemployed, compared to 12% during the same period last year.

“In the lower middle market, I have come across more corporate professionals who are becoming serious about buying a business. Many have put in 20-30 years and see a business acquisition as a great way to make a career change that brings great financial opportunity, but also an adventure that their current career can't provide,” said John Pastoor of Calder Capital.

Tariffs add another layer of caution, but also opportunity. While they’ve caused some buyers to pause, they also present favorable conditions for risk-tolerant entrepreneurs who view the disruption as temporary. According to surveyed business brokers, 40% say the market now favors buyers, compared to 26% who see an advantage for sellers and 25% who view it as balanced.

Demand Grows for Retail and Service Businesses

Despite ongoing economic uncertainty, the retail sector recorded gains in Q2, with buyers willing to pay higher prices for businesses showing strong financial performance. This category includes essential operations, such as grocery stores, convenience stores, and pharmacies, which have maintained momentum following their resilience during the pandemic.

After a decline in Q1, retail transactions rose 2% year-over-year, and the median sale price increased 13% as buyers targeted high-performing businesses. Median cash flow for retail companies jumped 14% year-over-year, while median revenue remained steady.

The service sector showed similar resilience, with deal activity increasing even as overall financial performance and sale prices dipped slightly. Many service businesses, such as auto repair, delivery routes, and healthcare, remain in steady demand during periods of economic volatility.

The number of service businesses sold in Q2 climbed 7% year-over-year, though the median sale price fell 5%. Profitability slipped slightly, with median cash flow down 3%, while median revenue rose 5%, reflecting continued buyer interest in this segment.

Manufacturing and Restaurant Acquisitions Decline Amid Financial Strain

Much of Q2’s decline in business acquisitions was concentrated in the manufacturing sector, which remains highly vulnerable to tariffs. Ongoing trade tensions and uncertainty around the cost of imported goods make it difficult for manufacturers to plan production or place orders, reducing the reliability of cash flow and sales projections, and increasing perceived risk for buyers.

As a result, manufacturing transactions dropped 28% year-over-year, while the median sale price fell 7%. Financials also weakened significantly, with median cash flow down 19% and median revenue down 26%. This follows a surge in Q1, when manufacturing deals reported a 54% jump in median sale price and large gains in both cash flow (+51%) and revenue (+64%).

“Tariffs are quietly but significantly influencing the business-for-sale market, especially in sectors exposed to global supply chains, raw materials, and price-sensitive manufacturing,” said Vipin Singh of Murphy Business Sales – Edison Office.

“The effect of tariffs depends greatly on the industry. Many more buyers were interested in buying a US manufacturing business, but only if the raw materials were sourced in the US. Once tariff rates stabilize there will be less uncertainty and likely advantages for US businesses,” said Lee Sheaffer, CBI of BizReady, Inc.

Restaurants, already facing high food costs, also experienced declines. Many rely on tariff-sensitive goods, such as imported produce, meats, and liquor. Combined with inflation and softer consumer spending, profitability is increasingly challenged. Restaurants acquisitions dropped 16% in Q2. Although the median sale price ticked up 3% year-over-year, financials showed strain: median cash flow fell 8%, even as median revenue increased 6%. These numbers reflect restaurants' ongoing struggle to maintain profitability despite strong sales, suggesting dining out remains popular, even as margins tighten.

Market Outlook: Moderate Growth Fueled by Motivated Buyers

As inflation remains persistent and the Federal Reserve’s policy likely to be conservative, modest rate reductions are anticipated in the fall. However, ongoing trade uncertainty may continue to drive tariff-related inflation and cautious consumer spending, particularly for businesses that rely heavily on imported goods.

Overall, the business-for-sale market is expected to experience moderate, yet uneven growth with some industries performing better than others. In today’s economic environment—marked by volatility, tight credit, and slower growth—certain businesses carry less risk due to stable demand and overhead costs less vulnerable to economic swings.

Demand is expected to remain steady for businesses demonstrating strong financial performance and growth opportunities. In fact, most buyers (70%) say tariff policies are not causing them to delay their purchase timeline. However, recent changes to SBA lending requirements and stricter underwriting standards could narrow the pool of qualified buyers, lengthening sale timelines, and impacting sale prices.

Expert Advice: How Buyers and Sellers Can Prepare for a Successful Sale

In this competitive market, experienced business brokers say buyers need more than just capital. They need to position themselves as strong candidates and have a clear understanding of the competition for quality businesses.

“Plan ahead,” advises Lee Sheaffer, CBI of BizReady, Inc. “Buyers need to assess and present themselves competitively. Their industry knowledge, preparation, experience, aptitudes, financial strength, and focus are key to successfully acquiring a business.”

With sellers increasingly cautious due to tariffs and tighter lending standards, buyers who come prepared and communicate clearly are more likely to earn seller confidence and close the deal.

Buddy Carp of Squizzero, Carp & Associates, also stresses this point. “Have your lenders lined up and be ready to go when you find a business that fits your needs. Put your offer in quickly and provide as much information as you can about your qualifications and your financial ability to consummate the sale with your offer."

For those looking to sell in an environment marked by cautious buyers, brokers say preparation is key. Sellers must have a realistic understanding of what their business is worth, and if need be, make the necessary improvements to attract buyers.

Pat Adams of Acquisition Finders, urges owners to manage expectations: “Understand that the market value of your business is almost never going to feel equal to all the blood, sweat, and tears you’ve poured into it. There are buyers so be open to fact-based valuation and possibly carrying a seller note to encourage lenders you are confident in the business and the buyer's ability to manage it.”

With higher interest rates and a cautious lending environment, sellers should also be open to flexible deal structures.