A self-funded searcher buys one company, usually worth $1 million–$10 million, with 75–90% SBA debt, runs it as CEO and keeps roughly 60–80% of the equity. An independent sponsor finds a deal, raises the equity for that one deal from a capital partner and is paid mostly in fees and carried interest: in a 2025 Citrin Cooperman survey, most commonly a 2% closing fee, a management fee of 5% of EBITDA and carry above an 8–9.9% hurdle. As of October 2026, the SBA's $5 million loan cap is the practical line between the two, and above it the capital partner typically holds more of the equity and the key consent rights.
Both buy private companies with outside money. They differ in deal size, debt, who runs the company and how the person who found the deal gets paid.
The SBA sets it. As of October 2026, the 7(a) program lends at most $5 million per borrower, including affiliates. An Initial Acquisition also needs an equity injection of at least 10% of total project costs. If SBA debt is the only debt, the largest project it can fund is about $5.56 million ($5 million divided by 0.9).
Above that size, a buyer needs conventional debt, more seller financing or much more equity. That is where the independent sponsor model usually starts. Prices also change at that line. GF Data's 2024 medians were 4.5x EBITDA for companies with $1–10 million of enterprise value and 6.5x for $10–100 million. The IBBA's Q2 2026 Market Pulse put deals with $5–50 million of EBITDA at an average of 5.8x.
So the sponsor is usually paying a higher multiple, without SBA terms, for a company that should be less dependent on its owner. The searcher is usually paying a lower multiple for a smaller company with more key-person risk.
Control follows the money. In a self-funded deal, the searcher owns the majority and makes the decisions. The SBA lender and investors have covenants and consent rights, but the searcher runs the board and the cap table.
In a sponsor deal, the capital partner usually puts up most of the equity. It typically negotiates consent rights over budgets, debt, acquisitions, executive hires and the timing of a sale. The sponsor has influence, and a good sponsor has a lot of it. But the capital partner often decides when to sell. If its fund has a fixed life, that can force a sale before you would choose one.
This matters most for anyone who wants to build a holding company. A holding company needs to keep companies, not sell them on a fund's schedule. A self-funded searcher can usually choose to keep a business. A sponsor usually needs a capital partner willing to hold for a long time, such as a family office.
A self-funded searcher is paid like an owner. Searchers commonly take a salary of $100,000–$150,000 after closing. The main reward is the 60–80% equity stake when the company is sold, refinanced or held for cash flow.
An independent sponsor is paid like a deal manager. The 2025 Citrin Cooperman survey of more than 170 respondents found:
The sponsor earns fees whether or not the deal does well. The carry pays only if the capital partner first gets its money back plus the hurdle.
The prices, equity checks and exit values below are assumptions chosen to show the arithmetic. The fee and carry rates come from the survey above.
The results look similar on paper. The risk is not. The searcher signed a personal guarantee on most of the purchase price. The sponsor did not, but has no salary until a deal closes and no control over when it sells.
Where these numbers come from: Sponsor fees, carry and hurdles come from the Citrin Cooperman 2025 independent sponsor survey. Self-funded deal size, debt, equity, salary and investor terms come from Smash and Searchfunder. Multiples by deal size come from GF Data via Carry and Conquer and the IBBA Market Pulse Q2 2026. The loan cap comes from the SBA and the injection rule from SOP 50 10 8.1 as summarized by Cantrell Firm. SOP 50 10 8.1 applies to loans that receive an SBA loan number on or after October 1, 2026 (SBA Information Notice 5000-880695).
Yes. A searcher who closes one SBA deal and runs it well has a track record to show capital partners. The next deal, if it is larger than the SBA cap allows, can be done as a sponsored deal. Whether it sits inside your first company or beside it is a structure question to settle first.
Not on an SBA loan, because sponsor deals generally do not use one. Conventional lenders may ask for limited recourse or none. Confirm the terms with the lender, because they vary by deal.
The closing fee pays for work done before there was a deal. The management fee pays for oversight after closing. The capital partner accepts both because it did not have to find, negotiate or diligence the deal itself.
If the first company is under the SBA cap, a self-funded deal usually keeps control with the buyer, who can then choose to hold. Sponsor-style capital fits larger deals best when the capital partner accepts a long holding period.
Search funds, self-funded searchers and sponsors are three ways to buy one company. The fourth way, a holding company that keeps buying, is compared in ETA, search fund, independent sponsor or holding company: what's the difference?
Meraki Dealmakers is a service of Meraki Partners, LLC, an advisory firm. It is not a broker-dealer, investment adviser, business broker, law firm or accounting firm. This article is general information, not legal, tax or investment advice.
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Meraki Dealmakers is a service of Meraki Partners, LLC.
Meraki Partners, LLC is an advisory firm. It is not a broker-dealer, investment adviser, business broker, law firm or accounting firm, and does not solicit investors or receive compensation based on capital raised.
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