Ed Swearingen started the developments that led to the Merlin through gradual modifications to the Beechcraft Twin Bonanza and Queen Air business aircraft which he dubbed Excalibur.

Then a hybrid aircraft was developed, with a new fuselage and vertical fin, mated to salvaged and modified (wet) Queen Air wings and horizontal tails, and Twin Bonanza landing gear: the Merlin.

This had new wings and engine nacelles with inverted inlet Garrett engines (this again becoming a defining feature of all subsequent production models), new landing gear with two wheels on each leg, a redesigned horizontal tail mounted on the vertical fin instead of on the fuselage as in earlier models (This and subsequent Merlin and Metro models have a trimmable horizontal stabilizer (THS) usually used on jet aircraft, one of only two turboprop aircraft types to have this design feature).

The SA226-TC Metro was more-or-less a new design, conceptually a stretch of the Merlin II (which it superficially resembled) sized to seat 22 passengers.

[2] These sales were not immediately forthcoming however, as the company was financially stretched by the development of the Metro prototype and lacked the funds to gear up for production.

[5] Among the changes made were larger, ovalised rectangular windows replacing the circular porthole-style windows of the early aircraft, and optional provision for a small Rocket-Assisted Take Off (RATO) rocket in the tail cone, this being offered to improve takeoff performance out of "hot & high" airfields.

The IIIB differed mainly by TPE331-10U engines of increased power driving four-bladed propellers turning in the opposite direction to those of earlier models.

Other improvements incorporated into the Merlin IVC were a 10 ft (3.0 m) increase in wing span (achieved by the simple expedient of removing the wingtips from the Metro II wing, bolting an extension to the end of each wing, and fitting a new wingtip, redesigned to reduce drag), TPE331-11U engines with redesigned "quick-access" engine cowlings and driving four-bladed propellers as on the Merlin IIIB, and other drag-reducing airframe modifications including landing gear doors that close after the gear is extended.

The TIGO 540 was used despite the fact that one of the reasons the IO-720 was used in the Excalibur was that the Queen Air series' IGSO-480 and IGSO-540 engines from the same manufacturer were so troublesome.