Insights
2025-10-29
SBA 7(a) Loans for Partner Buyouts — How to Structure It Right
Introduction
Buying out a business partner can be one of the most complex financial moves you make. The SBA 7(a) loan program makes it possible with affordable, long-term financing designed to preserve cash flow and ownership stability.
1. Why the SBA 7(a) Loan Works for Buyouts
The program allows one partner to purchase another’s ownership share, using business cash flow to support repayment instead of outside capital.
2. Key Requirements
- Buyer must already own or manage the business.
- The departing partner must fully exit.
- The business must continue operations under the remaining owner.
- The lender will order a qualified business valuation.
3. How the Loan Is Structured
Partner buyouts are financed over 10 years, with at least 10–15 % down. The SBA 7(a) loan program allows lenders to offer flexible terms, preserving working capital.
4. Preparing for the Transaction
- Review business debt and cash flow
- Determine the value of the business
- Plan the transition early to maintain customer confidence
- Complete due diligence
Benefits of Using SBA Financing
- Lower down payment compared with conventional loans
- Longer repayment terms
- No outside investors needed
Key Takeaway
An SBA 7(a) loan offers a practical path to ownership transition while maintaining business continuity. Work with an SBA lender experienced in partner buyouts for smooth execution.
FAQs
Can I use a 7(a) loan to buy out multiple partners?
Yes, as long as the remaining owner keeps operating the business.
Do I need an appraisal or valuation?
Most lenders require an independent valuation to support the buyout price.
How much can I finance for a partner buyout?
Up to 100% financing is available for Partner Buyouts depending upon the business cash flow (and remaining owners have been with the business for 24 months or more, and debt to worth, prior to sale, is 9:1 or better).
Is seller financing allowed?
The treatment of equity no longer applies under the current SOP 50 10 8 starting 6/1/25 for a 2-year standby. Full loan period standby of seller debt is now needed. For a Partner Buyout, the seller debt can be included but will not count for the 10% equity when the 10% equity is needed.
How long does a partner-buyout loan take to close?
Roughly 45–60 days once transactional due diligence has been completed. This includes underwriting, business valuation, and a finalized purchase agreement.
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