How much must a buyer put in on an SBA 7(a) loan to buy a business, and how much can a seller note cover?
When a buyer new to the business takes it over with an SBA 7(a) loan, a deal SBA calls an Initial Acquisition, the buyer must put in at least 10% of the total project cost . A seller note can cover up to half of that 10%, but only if it is subordinated to the lender and takes no payments of principal or interest for the life of the 7(a) loan, and that half is shared with other standby debt and minority investors .
How long is the life of the loan? A 7(a) loan for a business purchase must have a stated maturity, no balloon payment, and be paid off over no more than 10 years, so on a business-only deal a standby seller note waits up to 10 years . The loan can run longer when the deal also buys real estate. On a blended loan, the real estate share may be paid over up to 25 years . A deal that buys an owner-occupied special purpose property together with the business operating from it may have a maturity of up to 25 years if 85% or more of the project cost is for real estate .
The 10% is SBA's minimum for an Initial Acquisition . This guide does not cover a particular lender's own credit standards, which a buyer learns from the lender's term sheet.
The rule in numbers, for a business bought on a $1,000,000 total project cost (price plus closing costs and working capital):
| Line | Amount |
|---|---|
| Total project cost | $1,000,000 |
| Minimum equity injection: 10%, which the lender cannot reduce when the buyer is new to the business On a touch screen, a tap shows all 2 sources in this group. | $100,000 |
| Most that a full-standby seller note can cover: half of the injection, less anything counted from other standby debt or a minority investor On a touch screen, a tap shows all 2 sources in this group. | $50,000 |
| Least that must come from unlimited sources, such as the buyer's own unborrowed cash On a touch screen, a tap shows all 2 sources in this group. | $50,000 |
| The rest: the SBA 7(a) loan plus any paying seller note, with total acquisition debt capped at the business valuation | $900,000 |
What counts toward the injection:
| Source | Counts toward the 10%? |
|---|---|
| Cash that is not borrowed, including a gift | Yes, no cap |
| A personal loan to a guarantor, if repayment can be shown to come from outside the business's cash flow (the owner's salary from the business does not count) | Yes, no cap |
| A grant that never has to be repaid during the loan | Yes, no cap |
| Eligible prepaid expenses, verified by the lender through paid invoices, canceled checks or bank statements | Yes, no cap |
| What the buyer paid for the business valuation and quality of earnings report | Yes (our review found no separate cap in the SOP) |
| A seller note, subordinated and on full standby for the whole loan term On a touch screen, a tap shows all 2 sources in this group. | Yes, within the shared half |
| Other debt on full standby, if its provider takes no equity investment in the business On a touch screen, a tap shows all 2 sources in this group. | Yes, within the shared half |
| A minority investor with less than 20% and no control, with no agreement to repay the investment or make distributions to recover it before the SBA guaranty is released On a touch screen, a tap shows all 2 sources in this group. | Yes, within the shared half |
| A seller note that takes payments during the loan | No: it counts as debt |
| A seller earnout | Not allowed in these loans |
Other numbers a buyer will meet, each explained below: the loan can be up to $5,000,000 ; a paying seller note can be refinanced only after 36 months ; the seller can stay on only as a consultant, for up to 24 months in total ; a purchase price of $3 million or more needs a quality of earnings report ; and anyone owning 20% or more after the sale personally guarantees the whole loan .
Sources for this answer
SOP 50 10 8.1 supports the rule that a 7(a) loan for a change of ownership has a stated amortization, no balloon, and an amortization of no more than 10 years (Special Purpose Properties aside).
7(a) loans are required to have a stated amortization, loan maturity, and may not have a balloon. a. 7(a) loans that facilitate a change of ownership must not have an amortization that exceeds 10 years, except as provided below for transactions involving Special Purpose Properties.
See U.S. Small Bus. Admin., SOP 50 10 8.1, Lender and Development Company Loan Programs, App. 15, para. B.1.a (eff. Oct. 1, 2026).
SOP 50 10 8.1 supports the point that, when a change of ownership also buys real estate on a blended loan, the real estate portion may be amortized over up to 25 years.
Only the portion of the real estate purchase may have an amortization that exceeds 10-years, up to a maximum of a 25-year term.
See U.S. Small Bus. Admin., SOP 50 10 8.1, Lender and Development Company Loan Programs, App. 15, para. B.1.a.i(b) (eff. Oct. 1, 2026).
SOP 50 10 8.1 supports the exception allowing a maturity of up to 25 years where the deal buys an owner-occupied special purpose property with the business and 85% or more of project cost is for real estate.
Special Purpose Properties Exemption: For transactions involving the acquisition of an owner-occupied Special Purpose Property which includes the business operating from that property, the Lender may also structure the loan with a maturity of up to 25 years if 85% or more of the use of the total project costs are for real estate.
See U.S. Small Bus. Admin., SOP 50 10 8.1, Lender and Development Company Loan Programs, App. 15, para. B.1.a.i(c) (eff. Oct. 1, 2026).
SOP 50 10 8.1 supports the definition of an Initial Acquisition as a deal producing a new majority or largest owner who was not already an owner, or who has been employed by the business for fewer than 24 months.
Initial Acquisition: A change of ownership transaction that results in a new majority or largest individual owner who was not previously a direct or indirect owner, or an individual who has been employed for fewer than 24 months by the business being acquired.
See U.S. Small Bus. Admin., SOP 50 10 8.1, Lender and Development Company Loan Programs, App. 15, para. A.1.a (eff. Oct. 1, 2026).
SOP 50 10 8.1 supports the 10% minimum equity injection for an Initial Acquisition, which cannot be reduced.
Initial Acquisition: 10%. For Initial Acquisitions, the required equity injection cannot be reduced or eliminated.
See U.S. Small Bus. Admin., SOP 50 10 8.1, Lender and Development Company Loan Programs, App. 15, para. C.2.a.i(a)(i) (eff. Oct. 1, 2026).
SOP 50 10 8.1 supports the point that the equity injection is measured against total project cost.
SBA requires equity injections (Applicant contribution) for change of ownership transactions to be based on the total project cost (all costs required to become operational, regardless of the source of funds, except for lines of credit and 504 loans).
See U.S. Small Bus. Admin., SOP 50 10 8.1, Lender and Development Company Loan Programs, App. 15, para. C.2.a.i (eff. Oct. 1, 2026).
SOP 50 10 8.1 supports the rule that the limited equity injection sources it lists (standby debt, seller debt on full standby and non-controlling minority equity investments) may, alone or together, supply no more than half of the required injection.
Limited Equity Injection Sources: The following sources, whether individually or in the aggregate, may provide no more than half of the required Equity Injection. Additional Limited Equity Sources may be used when additional funds are required to supplement the purchase when the sales price exceeds the value supported by the Business Valuation and Quality of Earnings report. In this situation, any additional funds provided must be on full standby. i) Standby Debt Agreements: (a) Debt that is on full standby (no payments of principal or interest for the term of the 7(a) loan) may be considered as equity for SBA’s purposes. Lender must use SBA Form 155 or its own equivalent Standby Agreement form, and a copy of the Note must be attached to the standby agreement and included in the credit file. (b) The standby debt may accrue interest and may be added to the standby debt and amortized after the 7(a) loan is paid in full. Standby Creditor must subordinate any lien rights in collateral securing the loan to Lender’s rights in the collateral and take no action against Borrower or any collateral securing the Standby Debt without Lender’s consent. (c) The provider of standby debt may not take an equity investment in the business. ii) Seller Debt: (a) Seller debt that is subordinated to the Lender and on full standby (no payments of principal or interest for the term of the 7(a) loan) may be considered as equity for SBA’s purposes. (b) Seller debt structured in conjunction with a change of ownership transaction is eligible to be refinanced after it has been in place and current for 36 months. iii) Non-controlling Minority Equity Investments: (a) To be considered as eligible equity, the investment may not be subject to any agreement to repay or make distributions to recover the investment prior to release of the SBA guaranty. To qualify as a Non-controlling Minority Equity Investor, the investor must have less than 20% equity in and exert no control over the operating business.
See U.S. Small Bus. Admin., SOP 50 10 8.1, Lender and Development Company Loan Programs, App. 15, para. C.2.a.ii(b) (eff. Oct. 1, 2026).
SOP 50 10 8.1 supports the rule that seller debt counts as equity only if subordinated and on full standby for the term of the 7(a) loan, as a limited equity injection source.
Seller debt that is subordinated to the Lender and on full standby (no payments of principal or interest for the term of the 7(a) loan) may be considered as equity for SBA’s purposes.
See U.S. Small Bus. Admin., SOP 50 10 8.1, Lender and Development Company Loan Programs, App. 15, para. C.2.a.ii(b)(ii)(a) (eff. Oct. 1, 2026).
SOP 50 10 8.1 supports the point that other debt on full standby is a limited equity injection source.
Debt that is on full standby (no payments of principal or interest for the term of the 7(a) loan) may be considered as equity for SBA’s purposes.
See U.S. Small Bus. Admin., SOP 50 10 8.1, Lender and Development Company Loan Programs, App. 15, para. C.2.a.ii(b)(i)(a) (eff. Oct. 1, 2026).
SOP 50 10 8.1 supports the conditions for a minority equity investment to count: no repayment before the guaranty is released, under 20% and no control.
To be considered as eligible equity, the investment may not be subject to any agreement to repay or make distributions to recover the investment prior to release of the SBA guaranty. To qualify as a Non-controlling Minority Equity Investor, the investor must have less than 20% equity in and exert no control over the operating business.
See U.S. Small Bus. Admin., SOP 50 10 8.1, Lender and Development Company Loan Programs, App. 15, para. C.2.a.ii(b)(iii)(a) (eff. Oct. 1, 2026).
SOP 50 10 8.1 supports the point that unborrowed cash, including a gift, is an unlimited equity source.
Cash that is not borrowed, whether on the business’s balance sheet or from other sources (e.g. gift).
See U.S. Small Bus. Admin., SOP 50 10 8.1, Lender and Development Company Loan Programs, App. 15, para. C.2.a.ii(a)(i) (eff. Oct. 1, 2026).
SOP 50 10 8.1 supports the point that a personal loan to a guarantor repaid from outside the business’s cash flow is an unlimited equity source.
Cash that comes from a personal loan to a guarantor where repayment can be demonstrated to come from a source other than the cash flow of the business (the salary paid to the owner by the business does not qualify).
See U.S. Small Bus. Admin., SOP 50 10 8.1, Lender and Development Company Loan Programs, App. 15, para. C.2.a.ii(a)(ii) (eff. Oct. 1, 2026).
SOP 50 10 8.1 supports the point that a grant with no repayment or clawback during the loan term is an unlimited equity source.
Grants that do not have any conditional repayment requirements, clawbacks, or any other provision that could require the repayment of the grant during the term of the 7(a) loan.
See U.S. Small Bus. Admin., SOP 50 10 8.1, Lender and Development Company Loan Programs, App. 15, para. C.2.a.ii(a)(iii) (eff. Oct. 1, 2026).
SOP 50 10 8.1 supports the point that verified eligible prepaid expenses are an unlimited equity source.
Eligible prepaid expenses that the Lender has verified by obtaining paid invoices, canceled checks or bank statements. Lender must retain copies of the documentation in the loan file.
See U.S. Small Bus. Admin., SOP 50 10 8.1, Lender and Development Company Loan Programs, App. 15, para. C.2.a.ii(a)(iv) (eff. Oct. 1, 2026).
SOP 50 10 8.1 supports the point that what the buyer spends on the financial due diligence reports can count toward the equity injection.
The out-of-pocket costs associated with all financial due diligence reports may be passed on to the borrower. Any funds expended by the Applicant on the report can count toward the equity injection.
See U.S. Small Bus. Admin., SOP 50 10 8.1, Lender and Development Company Loan Programs, App. 15, para. C.1 (eff. Oct. 1, 2026).
SOP 50 10 8.1 supports the points that seller debt not on full standby counts as debt and that total acquisition debt is limited to the business valuation.
The total debt eligible to support a change of ownership transaction (including seller debt that is not on full standby) is limited to the business valuation amount and must be supported by the Debt Service Coverage of the Applicant.
See U.S. Small Bus. Admin., SOP 50 10 8.1, Lender and Development Company Loan Programs, App. 15, para. A (Change of Ownership Requirements), item 4 (eff. Oct. 1, 2026).
SOP 50 10 8.1 supports the rule that seller earnouts are prohibited in 7(a) changes of ownership.
Seller earnouts are prohibited; however, buyer rebates based on business performance are allowed because this is a benefit to the Borrower.
See U.S. Small Bus. Admin., SOP 50 10 8.1, Lender and Development Company Loan Programs, App. 15, para. A (Change of Ownership Requirements), item 8 (eff. Oct. 1, 2026).
SOP 50 10 8.1 supports the $5,000,000 maximum for a standard 7(a) loan.
The maximum loan amount for any one Standard 7(a) loan is $5,000,000.
See U.S. Small Bus. Admin., SOP 50 10 8.1, Lender and Development Company Loan Programs, sec. B, ch. 1, para. B.1.a (eff. Oct. 1, 2026).
SOP 50 10 8.1 supports the rule that a seller note may be refinanced only after 36 months in place and current.
To be eligible for refinancing, any seller-financed Note must have been in place and current (not on standby) for at least 36 months following the change of ownership.
See U.S. Small Bus. Admin., SOP 50 10 8.1, Lender and Development Company Loan Programs, App. 15, para. A.3.a.i(a) (eff. Oct. 1, 2026).
SOP 50 10 8.1 supports the rule that the seller in an Initial Acquisition may not remain with the business except as a consultant for up to 24 months in aggregate.
Except as provided below, the seller in a Business Expansion or Initial Acquisition change of ownership transaction may not remain as an officer, director, stockholder, or employee of the business. If a transitional period is needed to assist the business, the small business may contract with the seller as a consultant for a period not to exceed 24 months (in aggregate, including any extensions).
See U.S. Small Bus. Admin., SOP 50 10 8.1, Lender and Development Company Loan Programs, App. 15, para. A (Change of Ownership Requirements), item 9 (eff. Oct. 1, 2026).
SOP 50 10 8.1 supports the rule that Initial Acquisitions and Business Expansions priced at $3 million or more need a quality of earnings report.
For Business Expansion and Initial Acquisition transactions where the Purchase Price as defined in Paragraph A.1 is equal to or greater than $3 million, the Lender must also obtain a Quality of Earnings (QoE) in addition to the required Business Valuation.
See U.S. Small Bus. Admin., SOP 50 10 8.1, Lender and Development Company Loan Programs, App. 15, para. C.1.b.i (eff. Oct. 1, 2026).
SOP 50 10 8.1 supports the rule that, on a change of ownership, who must guarantee is decided by post-sale ownership.
For 7(a) change of ownership transactions, except those that involve a selling owner who will retain an indirect or direct ownership interest less than 20%, which must comply with the previously stated guaranty requirements, the percentages for determining who must provide a guaranty will be based on the post-sale percentage of direct and/or indirect ownership in the business.
See U.S. Small Bus. Admin., SOP 50 10 8.1, Lender and Development Company Loan Programs, App. 15, para. A.2 (eff. Oct. 1, 2026).
SOP 50 10 8.1 supports the rule that any individual owning 20% or more must give an unlimited full guaranty.
Any individual who has direct and/or indirect ownership of 20% or more of an Applicant must provide an unlimited full guaranty.
See U.S. Small Bus. Admin., SOP 50 10 8.1, Lender and Development Company Loan Programs, sec. A, ch. 5, para. A.1.a (eff. Oct. 1, 2026).
How much equity must a buyer put in to buy a business with an SBA 7(a) loan?
A first-time buyer taking control of a business with an SBA 7(a) loan must put in at least 10% of the total project cost, and the lender cannot reduce or waive that minimum .
SBA calls this deal an Initial Acquisition: a purchase that makes someone the new majority or largest individual owner who was not already an owner, or who has worked for the business for fewer than 24 months .
The 10% is measured against the total project cost, not the headline price. The SOP defines total project cost as all costs required to become operational, whatever the source of funds, other than lines of credit and 504 loans. Closing costs, working capital and other funded costs therefore raise the base along with the purchase price .
The 10% is SBA's floor for the program. This guide does not cover a particular lender's own credit standards, which a buyer learns from the lender's term sheet.
SBA lenders must follow SBA's Standard Operating Procedures, which the regulations list among the Loan Program Requirements lenders must comply with . The rules in this guide come from SOP 50 10 8.1, Appendix 15, which governs 7(a) changes of ownership.
Sources for this answer
SOP 50 10 8.1 supports the rule that an Initial Acquisition requires a 10% equity injection that cannot be reduced or eliminated.
Initial Acquisition: 10%. For Initial Acquisitions, the required equity injection cannot be reduced or eliminated.
See U.S. Small Bus. Admin., SOP 50 10 8.1, Lender and Development Company Loan Programs, App. 15, para. C.2.a.i(a)(i) (eff. Oct. 1, 2026).
SOP 50 10 8.1 supports the rule that the change-of-ownership equity injection is measured against total project cost.
SBA requires equity injections (Applicant contribution) for change of ownership transactions to be based on the total project cost (all costs required to become operational, regardless of the source of funds, except for lines of credit and 504 loans).
See U.S. Small Bus. Admin., SOP 50 10 8.1, Lender and Development Company Loan Programs, App. 15, para. C.2.a.i (eff. Oct. 1, 2026).
SOP 50 10 8.1 supports the definition of an Initial Acquisition as a deal that produces a new majority or largest owner who was not already an owner or a 24-month employee.
Initial Acquisition: A change of ownership transaction that results in a new majority or largest individual owner who was not previously a direct or indirect owner, or an individual who has been employed for fewer than 24 months by the business being acquired.
See U.S. Small Bus. Admin., SOP 50 10 8.1, Lender and Development Company Loan Programs, App. 15, para. A.1.a (eff. Oct. 1, 2026).
13 CFR § 120.10 supports the point that SBA Standard Operating Procedures are Loan Program Requirements imposed on SBA lenders.
Loan Program Requirements or SBA Loan Program Requirements are requirements imposed upon Lenders, CDCs, or Intermediaries by statute; SBA and applicable government-wide regulations; any agreement the Lender, CDC, or Intermediary has executed with SBA or to which the Lender or CDC is subject; SBA Standard Operating Procedures (SOPs); Federal Register notices; and official SBA notices and forms applicable to the 7(a) Loan Program, 504 Loan Program or Microloan Program, as such requirements are issued and revised by SBA from time to time.
See 13 C.F.R. § 120.10 (2026).
Can a seller note count toward the buyer's equity injection on an SBA 7(a) acquisition loan?
A seller note can count toward the equity injection on an SBA 7(a) acquisition loan only if it is subordinated to the lender and on full standby, with no principal or interest paid for the whole term of the 7(a) loan . Even then, it can supply no more than half of the required injection .
Full standby means the seller receives nothing on the note until the SBA loan is repaid. A note that pays for the first few years and then pauses, or pays interest only, does not qualify . Interest can keep running: the standby debt may accrue interest and be added to the standby debt and amortized after the 7(a) loan is paid in full. The seller, as standby creditor, subordinates any lien to the lender and agrees to take no action against the borrower or the collateral without the lender's consent .
The half cap is shared. Since SOP 50 10 8.1, a seller note on standby, other standby debt and a non-controlling minority equity investment are all limited equity sources , and “The following sources, whether individually or in the aggregate, may provide no more than half of the required Equity Injection.” A minority investor's money and the seller's standby note draw on the same half. Someone who provides other standby debt may not also take an equity investment in the business . A non-controlling minority investor is one with less than 20% of the equity and no control of the business .
The other half must come from unlimited sources, such as “Cash that is not borrowed, whether on the business’s balance sheet or from other sources (e.g. gift).”
Sources for this answer
SOP 50 10 8.1 supports the rule that seller debt counts as equity only if it is subordinated and on full standby for the term of the 7(a) loan.
Seller debt that is subordinated to the Lender and on full standby (no payments of principal or interest for the term of the 7(a) loan) may be considered as equity for SBA’s purposes.
See U.S. Small Bus. Admin., SOP 50 10 8.1, Lender and Development Company Loan Programs, App. 15, para. C.2.a.ii(b)(ii)(a) (eff. Oct. 1, 2026).
SOP 50 10 8.1 supports the rule that the limited equity injection sources it lists (standby debt, seller debt on full standby and non-controlling minority equity investments) may, alone or together, supply no more than half of the required injection.
Limited Equity Injection Sources: The following sources, whether individually or in the aggregate, may provide no more than half of the required Equity Injection. Additional Limited Equity Sources may be used when additional funds are required to supplement the purchase when the sales price exceeds the value supported by the Business Valuation and Quality of Earnings report. In this situation, any additional funds provided must be on full standby. i) Standby Debt Agreements: (a) Debt that is on full standby (no payments of principal or interest for the term of the 7(a) loan) may be considered as equity for SBA’s purposes. Lender must use SBA Form 155 or its own equivalent Standby Agreement form, and a copy of the Note must be attached to the standby agreement and included in the credit file. (b) The standby debt may accrue interest and may be added to the standby debt and amortized after the 7(a) loan is paid in full. Standby Creditor must subordinate any lien rights in collateral securing the loan to Lender’s rights in the collateral and take no action against Borrower or any collateral securing the Standby Debt without Lender’s consent. (c) The provider of standby debt may not take an equity investment in the business. ii) Seller Debt: (a) Seller debt that is subordinated to the Lender and on full standby (no payments of principal or interest for the term of the 7(a) loan) may be considered as equity for SBA’s purposes. (b) Seller debt structured in conjunction with a change of ownership transaction is eligible to be refinanced after it has been in place and current for 36 months. iii) Non-controlling Minority Equity Investments: (a) To be considered as eligible equity, the investment may not be subject to any agreement to repay or make distributions to recover the investment prior to release of the SBA guaranty. To qualify as a Non-controlling Minority Equity Investor, the investor must have less than 20% equity in and exert no control over the operating business.
See U.S. Small Bus. Admin., SOP 50 10 8.1, Lender and Development Company Loan Programs, App. 15, para. C.2.a.ii(b) (eff. Oct. 1, 2026).
SOP 50 10 8.1 supports the point that standby debt other than seller debt is a limited equity injection source and counts only on full standby.
Debt that is on full standby (no payments of principal or interest for the term of the 7(a) loan) may be considered as equity for SBA’s purposes.
See U.S. Small Bus. Admin., SOP 50 10 8.1, Lender and Development Company Loan Programs, App. 15, para. C.2.a.ii(b)(i)(a) (eff. Oct. 1, 2026).
SOP 50 10 8.1 supports the points that standby debt may accrue interest paid only after the 7(a) loan is repaid, and that the standby creditor subordinates its liens and takes no action without the lender's consent.
The standby debt may accrue interest and may be added to the standby debt and amortized after the 7(a) loan is paid in full. Standby Creditor must subordinate any lien rights in collateral securing the loan to Lender’s rights in the collateral and take no action against Borrower or any collateral securing the Standby Debt without Lender’s consent.
See U.S. Small Bus. Admin., SOP 50 10 8.1, Lender and Development Company Loan Programs, App. 15, para. C.2.a.ii(b)(i)(b) (eff. Oct. 1, 2026).
SOP 50 10 8.1 supports the definition of a non-controlling minority equity investor as one holding less than 20% with no control.
To qualify as a Non-controlling Minority Equity Investor, the investor must have less than 20% equity in and exert no control over the operating business.
See U.S. Small Bus. Admin., SOP 50 10 8.1, Lender and Development Company Loan Programs, App. 15, para. C.2.a.ii(b)(iii)(a) (eff. Oct. 1, 2026).
SOP 50 10 8.1 supports the point that unborrowed cash, including a gift, is an unlimited equity source.
Cash that is not borrowed, whether on the business’s balance sheet or from other sources (e.g. gift).
See U.S. Small Bus. Admin., SOP 50 10 8.1, Lender and Development Company Loan Programs, App. 15, para. C.2.a.ii(a)(i) (eff. Oct. 1, 2026).
How do you calculate the equity injection and the seller-note limit on an SBA 7(a) acquisition loan?
For an Initial Acquisition, the minimum equity injection is 10% of total project cost, and limited sources, such as a full-standby seller note, may together supply no more than half of that minimum .
An illustrative Initial Acquisition, with round figures. It doubles the $1,000,000 deal at the top of this guide to show that the minimum injection and the shared limited-source cap scale with total project cost, and then works through a seller note larger than the limit:
| Line | Amount |
|---|---|
| Total project cost (price, closing costs, working capital) | $2,000,000 |
| Minimum equity injection (10%) | $200,000 |
| Most that limited sources can supply (half of $200,000), including a full-standby seller note | $100,000 |
| Least that must come from unlimited sources, such as the buyer's own unborrowed cash | $100,000 |
If the seller's standby note is $100,000, a qualifying non-controlling minority investment cannot also count toward the minimum; the other $100,000 has to come from unlimited sources, such as the buyer's unborrowed cash or a gift . A standby seller note larger than $100,000 can still be part of the deal, but the excess does not count toward the minimum, so it does not reduce the $100,000 that unlimited sources must supply .
A price above the business valuation changes the math. The valuation must support the purchase price, and “If the amount paid for the business exceeds the business valuation, the difference must be made up by equity.” Extra limited-source money may help fill that gap only if it, too, is on full standby .
Sources for this answer
SOP 50 10 8.1 supports the 10% Initial Acquisition minimum used in the worked example.
Initial Acquisition: 10%. For Initial Acquisitions, the required equity injection cannot be reduced or eliminated.
See U.S. Small Bus. Admin., SOP 50 10 8.1, Lender and Development Company Loan Programs, App. 15, para. C.2.a.i(a)(i) (eff. Oct. 1, 2026).
SOP 50 10 8.1 supports the point that the equity injection in the worked example is measured against total project cost.
SBA requires equity injections (Applicant contribution) for change of ownership transactions to be based on the total project cost (all costs required to become operational, regardless of the source of funds, except for lines of credit and 504 loans).
See U.S. Small Bus. Admin., SOP 50 10 8.1, Lender and Development Company Loan Programs, App. 15, para. C.2.a.i (eff. Oct. 1, 2026).
SOP 50 10 8.1 supports the point that full-standby seller debt is one of the limited equity injection sources in the worked example.
Seller debt that is subordinated to the Lender and on full standby (no payments of principal or interest for the term of the 7(a) loan) may be considered as equity for SBA’s purposes.
See U.S. Small Bus. Admin., SOP 50 10 8.1, Lender and Development Company Loan Programs, App. 15, para. C.2.a.ii(b)(ii)(a) (eff. Oct. 1, 2026).
SOP 50 10 8.1 supports the point that a qualifying non-controlling minority equity investment is a limited equity injection source that shares the cap with seller debt.
To qualify as a Non-controlling Minority Equity Investor, the investor must have less than 20% equity in and exert no control over the operating business.
See U.S. Small Bus. Admin., SOP 50 10 8.1, Lender and Development Company Loan Programs, App. 15, para. C.2.a.ii(b)(iii)(a) (eff. Oct. 1, 2026).
SOP 50 10 8.1 supports the rule that the limited equity injection sources it lists (standby debt, seller debt on full standby and non-controlling minority equity investments) may, alone or together, supply no more than half of the required injection.
Limited Equity Injection Sources: The following sources, whether individually or in the aggregate, may provide no more than half of the required Equity Injection. Additional Limited Equity Sources may be used when additional funds are required to supplement the purchase when the sales price exceeds the value supported by the Business Valuation and Quality of Earnings report. In this situation, any additional funds provided must be on full standby. i) Standby Debt Agreements: (a) Debt that is on full standby (no payments of principal or interest for the term of the 7(a) loan) may be considered as equity for SBA’s purposes. Lender must use SBA Form 155 or its own equivalent Standby Agreement form, and a copy of the Note must be attached to the standby agreement and included in the credit file. (b) The standby debt may accrue interest and may be added to the standby debt and amortized after the 7(a) loan is paid in full. Standby Creditor must subordinate any lien rights in collateral securing the loan to Lender’s rights in the collateral and take no action against Borrower or any collateral securing the Standby Debt without Lender’s consent. (c) The provider of standby debt may not take an equity investment in the business. ii) Seller Debt: (a) Seller debt that is subordinated to the Lender and on full standby (no payments of principal or interest for the term of the 7(a) loan) may be considered as equity for SBA’s purposes. (b) Seller debt structured in conjunction with a change of ownership transaction is eligible to be refinanced after it has been in place and current for 36 months. iii) Non-controlling Minority Equity Investments: (a) To be considered as eligible equity, the investment may not be subject to any agreement to repay or make distributions to recover the investment prior to release of the SBA guaranty. To qualify as a Non-controlling Minority Equity Investor, the investor must have less than 20% equity in and exert no control over the operating business.
See U.S. Small Bus. Admin., SOP 50 10 8.1, Lender and Development Company Loan Programs, App. 15, para. C.2.a.ii(b) (eff. Oct. 1, 2026).
SOP 50 10 8.1 supports the point that the rest of the minimum can come from unlimited sources, which include unborrowed cash and gifts.
Cash that is not borrowed, whether on the business’s balance sheet or from other sources (e.g. gift).
See U.S. Small Bus. Admin., SOP 50 10 8.1, Lender and Development Company Loan Programs, App. 15, para. C.2.a.ii(a)(i) (eff. Oct. 1, 2026).
SOP 50 10 8.1 supports the rule that any price above the business valuation must be covered by equity.
If the amount paid for the business exceeds the business valuation, the difference must be made up by equity.
See U.S. Small Bus. Admin., SOP 50 10 8.1, Lender and Development Company Loan Programs, App. 15, para. C.1.a.vi (eff. Oct. 1, 2026).
SOP 50 10 8.1 supports the rule that additional limited-source funds used when the price exceeds the supported value must be on full standby.
Additional Limited Equity Sources may be used when additional funds are required to supplement the purchase when the sales price exceeds the value supported by the Business Valuation and Quality of Earnings report. In this situation, any additional funds provided must be on full standby.
See U.S. Small Bus. Admin., SOP 50 10 8.1, Lender and Development Company Loan Programs, App. 15, para. C.2.a.ii(b) (eff. Oct. 1, 2026).
What happens on an SBA 7(a) acquisition loan when the seller note is paid during the loan term?
A seller note that is paid during the SBA loan term does not count toward the buyer's equity injection . It counts as debt instead, and total acquisition debt, including that note, is capped at the business valuation and must be covered by the business's cash flow .
Only seller debt on full standby for the term of the 7(a) loan counts as equity . A paying note is debt, so its payments are part of the debt service coverage the lender has to see .
A paying seller note can later be refinanced into SBA financing, but not soon: “To be eligible for refinancing, any seller-financed Note must have been in place and current (not on standby) for at least 36 months following the change of ownership.” Under the June 2025 version of the SOP the wait was 24 months .
A seller note is not the only way sellers take part of the price later. An earnout is not available: “Seller earnouts are prohibited; however, buyer rebates based on business performance are allowed because this is a benefit to the Borrower.”
Sources for this answer
SOP 50 10 8.1 supports the rule that total acquisition debt, including seller debt not on full standby, is limited to the business valuation and must be supported by debt service coverage.
The total debt eligible to support a change of ownership transaction (including seller debt that is not on full standby) is limited to the business valuation amount and must be supported by the Debt Service Coverage of the Applicant.
See U.S. Small Bus. Admin., SOP 50 10 8.1, Lender and Development Company Loan Programs, App. 15, para. A (Change of Ownership Requirements), item 4 (eff. Oct. 1, 2026).
SOP 50 10 8.1 supports the point that seller debt counts as equity only when it is on full standby, so a paying note does not.
Seller debt that is subordinated to the Lender and on full standby (no payments of principal or interest for the term of the 7(a) loan) may be considered as equity for SBA’s purposes.
See U.S. Small Bus. Admin., SOP 50 10 8.1, Lender and Development Company Loan Programs, App. 15, para. C.2.a.ii(b)(ii)(a) (eff. Oct. 1, 2026).
SOP 50 10 8.1 supports the rule that a seller note may be refinanced only after 36 months in place and current.
To be eligible for refinancing, any seller-financed Note must have been in place and current (not on standby) for at least 36 months following the change of ownership.
See U.S. Small Bus. Admin., SOP 50 10 8.1, Lender and Development Company Loan Programs, App. 15, para. A.3.a.i(a) (eff. Oct. 1, 2026).
SOP 50 10 8 supports the earlier rule that a seller note could be refinanced after 24 months in place and current.
To be eligible for refinancing, any seller financed note must have been in place and current (not on standby) for at least 24 months following the change of ownership.
See U.S. Small Bus. Admin., SOP 50 10 8, Lender and Development Company Loan Programs, sec. B, ch. 1, para. A.1.a.vii(a) (eff. June 1, 2025) (superseded Oct. 1, 2026).
SOP 50 10 8.1 supports the rule that seller earnouts are prohibited in 7(a) changes of ownership.
Seller earnouts are prohibited; however, buyer rebates based on business performance are allowed because this is a benefit to the Borrower.
See U.S. Small Bus. Admin., SOP 50 10 8.1, Lender and Development Company Loan Programs, App. 15, para. A (Change of Ownership Requirements), item 8 (eff. Oct. 1, 2026).
What changed for seller notes on SBA 7(a) acquisition loans in October 2026?
SOP 50 10 8.1, effective October 1, 2026, kept the full-standby rule and the half-of-the-injection cap for seller notes, but made the cap shared with other standby debt and minority equity investments .
Under SOP 50 10 8, effective June 1, 2025, a complete change of ownership already needed a 10% injection, and seller debt could count toward it only if it was on full standby for the life of the SBA loan and did not exceed half of the required injection . Its list of equity sources, which included other standby debt and an equity investment, set no cap on them; the half limit applied only to seller debt . SOP 50 10 8.1 moved non-controlling minority equity, other standby debt and seller debt into one capped bucket .
What changed and what did not, side by side:
| Rule | SOP 50 10 8 (June 1, 2025) | SOP 50 10 8.1 (October 1, 2026) |
|---|---|---|
| When a seller note counts toward the 10% | Only on full standby for the life of the SBA loan | Only subordinated and on full standby for the term of the 7(a) loan |
| How much a standby seller note can count | Up to half of the injection; the cap applied to seller debt alone On a touch screen, a tap shows all 2 sources in this group. | Up to half of the injection, shared with other standby debt and minority equity |
| Wait before a paying seller note can be refinanced | 24 months | 36 months |
| Seller consulting after the sale | Up to 12 months, including extensions | Up to 24 months in total |
| Quality of earnings report | Our review found no such requirement | Required for Initial Acquisitions and business expansions at a $3 million purchase price or more |
| Seller earnouts | Prohibited | Prohibited |
| Which applications it governs | Submitted through September 30, 2026 | Received by SBA on or after October 1, 2026 |
Which version governs turns on the application date. SBA's notice issuing the updated SOP says “This updated version of the SOP is effective October 1, 2026, and will apply to all applications received … by SBA on or after that date.” Lenders keep using SOP 50 10 8 for applications submitted through September 30, 2026 .
Sources for this answer
SOP 50 10 8 supports the earlier rules that a complete change of ownership needed a 10% injection and that seller debt counted toward it only on full standby for the life of the loan and up to half of the required injection.
Changes of ownership resulting in a new owner (complete change of ownership): At a minimum, SBA requires an equity injection of at least 10 percent of the total project costs, (all costs required to complete the change of ownership, regardless of the source of funds, except for lines of credit and 504 loans) for such transactions. Seller debt may not be considered as part of the equity injection unless it is on full standby for the life of the SBA loan, and it does not exceed half of the SBA-required equity injection
See U.S. Small Bus. Admin., SOP 50 10 8, Lender and Development Company Loan Programs, sec. B, ch. 1, para. C.2.b.iii(b) (eff. June 1, 2025) (superseded Oct. 1, 2026).
SOP 50 10 8 supports the point that its list of equity injection sources, including standby debt and an equity investment not repayable before the guaranty is released, carried no cap; the half limit in that version applied only to seller debt.
Source of Equity Injection: The following may be considered equity injection. a) Standby Agreements - only debt that is on full standby (no payments of principal or interest for the term of the 7(a) loan) may be considered as equity for SBA’s purposes. Lender must use SBA Form 155 or its own equivalent Standby Agreement form, and a copy of the note must be attached to the standby agreement. The standby debt may accrue interest and may be added to the standby debt and amortized after the 7(a) loan is paid in full. Standby Creditor must subordinate any lien rights in collateral securing the loan to Lender’s rights in the collateral and take no action against Borrower or any collateral securing the Standby Debt without Lender’s consent. b) Cash that is not borrowed, whether on the business’s balance sheet or from other sources. c) Cash that comes from a personal loan where repayment can be demonstrated to come from a source other than the cash flow of the business (the salary paid to the owner by the business does not qualify). d) Grants that do not have repayment or clawback provisions during the life of the 7(a) loan. e) Assets other than cash – An appraisal or other valuation by an independent third party is required if the valuation of the fixed assets is greater than the Net Book Value. A valuation of the fixed assets provided as part of a business valuation will not meet these requirements. f) Prepaid expenses that the Lender has verified by obtaining paid invoices, canceled checks, or bank statements. Lender must retain copies of the documentation in the loan file. g) An equity investment not subject to an agreement to repay equity or make distributions to recover an investor’s investment prior to release of the guaranty. Note: Whether called “search funding” or by some other name, SBA will consider any investment subject to an agreement to repay equity or make distributions to recover an investor’s investment prior to release of the guaranty (e.g., certain types of redeemable preferred stock) to be debt and not equity.
See U.S. Small Bus. Admin., SOP 50 10 8, Lender and Development Company Loan Programs, sec. B, ch. 1, para. C.2.b.iv (eff. June 1, 2025) (superseded Oct. 1, 2026).
SOP 50 10 8.1 supports the rule that the limited equity injection sources it lists (standby debt, seller debt on full standby and non-controlling minority equity investments) may, alone or together, supply no more than half of the required injection.
Limited Equity Injection Sources: The following sources, whether individually or in the aggregate, may provide no more than half of the required Equity Injection. Additional Limited Equity Sources may be used when additional funds are required to supplement the purchase when the sales price exceeds the value supported by the Business Valuation and Quality of Earnings report. In this situation, any additional funds provided must be on full standby. i) Standby Debt Agreements: (a) Debt that is on full standby (no payments of principal or interest for the term of the 7(a) loan) may be considered as equity for SBA’s purposes. Lender must use SBA Form 155 or its own equivalent Standby Agreement form, and a copy of the Note must be attached to the standby agreement and included in the credit file. (b) The standby debt may accrue interest and may be added to the standby debt and amortized after the 7(a) loan is paid in full. Standby Creditor must subordinate any lien rights in collateral securing the loan to Lender’s rights in the collateral and take no action against Borrower or any collateral securing the Standby Debt without Lender’s consent. (c) The provider of standby debt may not take an equity investment in the business. ii) Seller Debt: (a) Seller debt that is subordinated to the Lender and on full standby (no payments of principal or interest for the term of the 7(a) loan) may be considered as equity for SBA’s purposes. (b) Seller debt structured in conjunction with a change of ownership transaction is eligible to be refinanced after it has been in place and current for 36 months. iii) Non-controlling Minority Equity Investments: (a) To be considered as eligible equity, the investment may not be subject to any agreement to repay or make distributions to recover the investment prior to release of the SBA guaranty. To qualify as a Non-controlling Minority Equity Investor, the investor must have less than 20% equity in and exert no control over the operating business.
See U.S. Small Bus. Admin., SOP 50 10 8.1, Lender and Development Company Loan Programs, App. 15, para. C.2.a.ii(b) (eff. Oct. 1, 2026).
SOP 50 10 8.1 supports the point that the current version keeps the rule that seller debt counts as equity only when subordinated and on full standby for the term of the 7(a) loan, now as a limited equity injection source.
Seller debt that is subordinated to the Lender and on full standby (no payments of principal or interest for the term of the 7(a) loan) may be considered as equity for SBA’s purposes.
See U.S. Small Bus. Admin., SOP 50 10 8.1, Lender and Development Company Loan Programs, App. 15, para. C.2.a.ii(b)(ii)(a) (eff. Oct. 1, 2026).
SOP 50 10 8.1 supports the point that other standby debt is now a limited equity injection source.
Debt that is on full standby (no payments of principal or interest for the term of the 7(a) loan) may be considered as equity for SBA’s purposes.
See U.S. Small Bus. Admin., SOP 50 10 8.1, Lender and Development Company Loan Programs, App. 15, para. C.2.a.ii(b)(i)(a) (eff. Oct. 1, 2026).
SOP 50 10 8.1 supports the point that a non-controlling minority equity investment is now a limited equity injection source.
To qualify as a Non-controlling Minority Equity Investor, the investor must have less than 20% equity in and exert no control over the operating business.
See U.S. Small Bus. Admin., SOP 50 10 8.1, Lender and Development Company Loan Programs, App. 15, para. C.2.a.ii(b)(iii)(a) (eff. Oct. 1, 2026).
SOP 50 10 8 supports the point that seller earnouts were already prohibited before SOP 50 10 8.1.
Seller earnouts are prohibited; however, buyer rebates based on business performance are allowed because this is a benefit to the Borrower.
See U.S. Small Bus. Admin., SOP 50 10 8, Lender and Development Company Loan Programs, sec. B, ch. 1, para. A.2.d (eff. June 1, 2025) (superseded Oct. 1, 2026).
SOP 50 10 8.1 supports the point that seller earnouts remain prohibited.
Seller earnouts are prohibited; however, buyer rebates based on business performance are allowed because this is a benefit to the Borrower.
See U.S. Small Bus. Admin., SOP 50 10 8.1, Lender and Development Company Loan Programs, App. 15, para. A (Change of Ownership Requirements), item 8 (eff. Oct. 1, 2026).
SOP 50 10 8 supports the earlier 12-month limit on a seller's consulting period after the sale.
If a short transitional period is needed to assist the business, the small business may contract with the seller as a consultant for a period not to exceed 12 months including any extensions.
See U.S. Small Bus. Admin., SOP 50 10 8, Lender and Development Company Loan Programs, sec. B, ch. 1, para. A.2.e (eff. June 1, 2025) (superseded Oct. 1, 2026).
SOP 50 10 8.1 supports the current 24-month aggregate limit on a seller's consulting period.
If a transitional period is needed to assist the business, the small business may contract with the seller as a consultant for a period not to exceed 24 months (in aggregate, including any extensions).
See U.S. Small Bus. Admin., SOP 50 10 8.1, Lender and Development Company Loan Programs, App. 15, para. A (Change of Ownership Requirements), item 9 (eff. Oct. 1, 2026).
SOP 50 10 8.1 supports the current 36-month wait before a seller note can be refinanced.
To be eligible for refinancing, any seller-financed Note must have been in place and current (not on standby) for at least 36 months following the change of ownership.
See U.S. Small Bus. Admin., SOP 50 10 8.1, Lender and Development Company Loan Programs, App. 15, para. A.3.a.i(a) (eff. Oct. 1, 2026).
SOP 50 10 8 supports the earlier 24-month wait before a seller note could be refinanced.
To be eligible for refinancing, any seller financed note must have been in place and current (not on standby) for at least 24 months following the change of ownership.
See U.S. Small Bus. Admin., SOP 50 10 8, Lender and Development Company Loan Programs, sec. B, ch. 1, para. A.1.a.vii(a) (eff. June 1, 2025) (superseded Oct. 1, 2026).
SOP 50 10 8.1 supports the rule that Initial Acquisitions and Business Expansions priced at $3 million or more need a quality of earnings report.
For Business Expansion and Initial Acquisition transactions where the Purchase Price as defined in Paragraph A.1 is equal to or greater than $3 million, the Lender must also obtain a Quality of Earnings (QoE) in addition to the required Business Valuation.
See U.S. Small Bus. Admin., SOP 50 10 8.1, Lender and Development Company Loan Programs, App. 15, para. C.1.b.i (eff. Oct. 1, 2026).
SBA Information Notice 5000-882227 supports the transition rule that SOP 50 10 8.1 applies to applications received by SBA on or after October 1, 2026, and SOP 50 10 8 to applications submitted through September 30, 2026 (the 1 after received is the notice's footnote marker).
This updated version of the SOP is effective October 1, 2026, and will apply to all applications received1 by SBA on or after that date. SBA Lenders and SBA employees must continue to use SOP 50 10 8 for 7(a) and 504 applications submitted through September 30, 2026.
See U.S. Small Bus. Admin., Information Notice 5000-882227, Issuance of Technical Updates to SOP 50 10 8.1, at 1 (Sept. 25, 2026) (eff. Oct. 1, 2026).
How large can an SBA 7(a) acquisition loan be, and who must personally guarantee it?
A standard SBA 7(a) loan can be up to $5,000,000, and every individual who will own 20% or more of the borrower after the sale must give an unlimited personal guaranty .
The $5,000,000 limit applies to the borrower together with its affiliates, so a buyer who already owns other businesses may have less room . It is a ceiling, not an amount the lender must offer.
The guaranty is unlimited: it covers the whole loan, not the guarantor's ownership percentage. On a change of ownership, the 20% test is applied to ownership after the sale, so a buyer who will own 20% or more signs; a selling owner who keeps less than 20% is subject to a separate guaranty rule . That rule does not reach an Initial Acquisition, where the seller may not keep a stake . A spouse who owns less than 20% must also guarantee in full when the spouses and minor children together own 20% or more .
Sources for this answer
SOP 50 10 8.1 supports the $5,000,000 maximum for a standard 7(a) loan.
The maximum loan amount for any one Standard 7(a) loan is $5,000,000.
See U.S. Small Bus. Admin., SOP 50 10 8.1, Lender and Development Company Loan Programs, sec. B, ch. 1, para. B.1.a (eff. Oct. 1, 2026).
SOP 50 10 8.1 supports the rule that SBA's loan maximums apply to the applicant and its affiliates as one business.
If affiliation exists, SBA’s loan maximums apply to the Applicant, including all affiliates, as if all were a single business.
See U.S. Small Bus. Admin., SOP 50 10 8.1, Lender and Development Company Loan Programs, sec. B, ch. 1, para. B.1.b (eff. Oct. 1, 2026).
SOP 50 10 8.1 supports the rule that a spouse owning less than 20% must guarantee in full when the spouses and minor children together own 20% or more.
Each spouse owning less than 20% of an Applicant must personally guarantee the loan in full when the combined ownership interest of both spouses and minor children is 20% or more.
See U.S. Small Bus. Admin., SOP 50 10 8.1, Lender and Development Company Loan Programs, sec. A, ch. 5, para. A.2.a (eff. Oct. 1, 2026).
SOP 50 10 8.1 supports the rule that any individual owning 20% or more of the applicant must give an unlimited full guaranty.
Any individual who has direct and/or indirect ownership of 20% or more of an Applicant must provide an unlimited full guaranty.
See U.S. Small Bus. Admin., SOP 50 10 8.1, Lender and Development Company Loan Programs, sec. A, ch. 5, para. A.1.a (eff. Oct. 1, 2026).
SOP 50 10 8.1 supports the point that the seller in an Initial Acquisition may not remain a stockholder, so the retained-owner guaranty rule does not arise there.
Except as provided below, the seller in a Business Expansion or Initial Acquisition change of ownership transaction may not remain as an officer, director, stockholder, or employee of the business.
See U.S. Small Bus. Admin., SOP 50 10 8.1, Lender and Development Company Loan Programs, App. 15, para. A (Change of Ownership Requirements), item 9 (eff. Oct. 1, 2026).
SOP 50 10 8.1 supports the rule that, on a change of ownership, the guaranty threshold is applied to post-sale ownership, with a separate rule for a selling owner who keeps less than 20%.
For 7(a) change of ownership transactions, except those that involve a selling owner who will retain an indirect or direct ownership interest less than 20%, which must comply with the previously stated guaranty requirements, the percentages for determining who must provide a guaranty will be based on the post-sale percentage of direct and/or indirect ownership in the business.
See U.S. Small Bus. Admin., SOP 50 10 8.1, Lender and Development Company Loan Programs, App. 15, para. A.2 (eff. Oct. 1, 2026).
Can the seller keep a stake or stay on after a buyer uses an SBA 7(a) loan to buy the business?
In an Initial Acquisition the seller cannot remain an officer, director, owner or employee of the business, but the business may hire the seller as a consultant for up to 24 months in total .
A buyer who wants the seller to keep a minority stake, often called rollover, is outside the Initial Acquisition structure. The SOP lets a seller stay on as an owner when an owner sells less than the whole stake (an owner buyout, partial change) , or when an ESOP or cooperative buys control . An outside buyer cannot use the owner buyout route to take control: someone who has not worked in the business for at least 24 months may buy only less than 50% and may not become the largest shareholder .
The consulting period is a ceiling that includes any extensions. A transition plan that keeps the seller for longer, or as an employee, does not fit an Initial Acquisition .
Sources for this answer
SOP 50 10 8.1 supports the rule that the seller in an Initial Acquisition or Business Expansion may not remain as an owner, officer, director or employee, and may consult for no more than 24 months in aggregate.
Except as provided below, the seller in a Business Expansion or Initial Acquisition change of ownership transaction may not remain as an officer, director, stockholder, or employee of the business. If a transitional period is needed to assist the business, the small business may contract with the seller as a consultant for a period not to exceed 24 months (in aggregate, including any extensions).
See U.S. Small Bus. Admin., SOP 50 10 8.1, Lender and Development Company Loan Programs, App. 15, para. A (Change of Ownership Requirements), item 9 (eff. Oct. 1, 2026).
SOP 50 10 8.1 supports the rule that in an Owner Buyout – Partial Change of Owner, where an owner sells less than the whole stake, the seller may stay on as an owner or employee.
The seller may stay on as an owner, officer, director, stockholder, Key Employee, or employee of the business.
See U.S. Small Bus. Admin., SOP 50 10 8.1, Lender and Development Company Loan Programs, App. 15, para. A.1.c.ii(e) (eff. Oct. 1, 2026).
SOP 50 10 8.1 supports the exceptions letting a seller stay on as an owner in a partial owner buyout or where an ESOP, equivalent trust or cooperative acquires a controlling interest.
The seller may stay on as an owner, officer, director, stockholder, or employee of the business or the ESOP when: a. One or more of the current owners is selling less than their entire percentage of their current ownership (Owner Buyout – Partial Change); or b. The purchaser is an ESOP or equivalent trust or a cooperative and is acquiring a controlling interest (51% or more) in the employer business (including when the ESOP or equivalent trust or cooperative is acquiring 100% ownership of the small business).
See U.S. Small Bus. Admin., SOP 50 10 8.1, Lender and Development Company Loan Programs, App. 15, para. A (Change of Ownership Requirements), item 9(a)-(b) (eff. Oct. 1, 2026).
SOP 50 10 8.1 supports the rule that, in an owner buyout, a person not employed by the business for 24 months may acquire less than 50% and may not become the largest shareholder.
For all Owner Buyout transactions, individuals not currently employed by the business for a minimum of 24 months may only acquire less than 50% of the total equity and may not become the largest direct or indirect shareholder.
See U.S. Small Bus. Admin., SOP 50 10 8.1, Lender and Development Company Loan Programs, App. 15, para. A.1.c (eff. Oct. 1, 2026).