{"ok":true,"canonical_url":"https://dealroom.so/glossary/arm-s-length","api_url":"https://dealroom.so/api/public/glossary/arm-s-length","data_freshness":{"sba_records_through":"2026-05-31","fdic_records_through":"2026-03-31","dealroom_last_updated":"2026-06-15","timezone":"America/Chicago"},"source_summary":["Public SBA 7(a) loan records","FDIC institution data","DealRoom lender and franchise enrichment"],"term":{"slug":"arm-s-length","term":"Arm's length","group":"Doing the deal","definition":"An arm's length transaction means the buyer and seller are independent and act in their own self-interest, without undue influence. For a buyer, this ensures fair market value and avoids conflicts of interest.","what_it_means":"The SBA requires 7(a) acquisition transactions to be arm's length to prevent fraud and ensure fair terms. This means the buyer and seller cannot be closely related or have common management or ownership. Disclose any existing relationships to your lender to avoid issues, especially if the seller will retain a minority stake or a seller note.","url":"https://dealroom.so/glossary/arm-s-length","official_sources":[{"slug":"13-cfr-part-120","title":"13 CFR Part 120 — Business Loans","official_url":"https://www.ecfr.gov/current/title-13/chapter-I/part-120","official_label":"View on eCFR","authority_tier":1,"publisher":"Office of the Federal Register","source_guide_url":"https://dealroom.so/sba-7a/sources/13-cfr-part-120"},{"slug":"sop-50-10","title":"SOP 50 10 — Lender and Development Company Loan Programs","official_url":"https://www.sba.gov/document/sop-50-10-lender-development-company-loan-programs","official_label":"View on SBA.gov","authority_tier":2,"publisher":"U.S. Small Business Administration","source_guide_url":"https://dealroom.so/sba-7a/sources/sop-50-10"}],"related":[{"slug":"common-management","term":"Common management","url":"https://dealroom.so/glossary/common-management"},{"slug":"conflict-of-interest","term":"Conflict of interest","url":"https://dealroom.so/glossary/conflict-of-interest"},{"slug":"fair-market-value","term":"Fair market value","url":"https://dealroom.so/glossary/fair-market-value"},{"slug":"seller-note","term":"Seller note","url":"https://dealroom.so/glossary/seller-note"}],"related_questions":[{"question":"What documents are needed to prove a partner buyout is an arm's length transaction for SBA purposes?","url":"https://dealroom.so/sba-7a/questions/what-documents-are-needed-to-prove-a-partner-buyout-is-an-arm-s-length-transaction-for-sba"},{"question":"What constitutes an acceptable 'arm's length transaction' for a change of ownership between related parties for a 7(a) loan?","url":"https://dealroom.so/for-lenders/questions/what-constitutes-an-acceptable-arm-s-length-transaction-for-a-change-of-ownership-between-"},{"question":"What are the specific requirements for a religious organization's business arm to be 7(a) eligible?","url":"https://dealroom.so/for-lenders/questions/what-are-the-specific-requirements-for-a-religious-organization-s-business-arm-to-be-7-a-e"},{"question":"What is the average repayment term length for an SBA 7(a) loan?","url":"https://dealroom.so/sba-loans/basics/what-is-the-average-repayment-term-length-for-an-sba-7-a-loan"},{"question":"How does a lender confirm an owner's U.S. citizenship if they were born in a U.S. territory or abroad to U.S. parents?","url":"https://dealroom.so/for-lenders/questions/how-does-a-lender-confirm-an-owner-s-u-s-citizenship-if-they-were-born-in-a-u-s-territory-"},{"question":"What is the SBA's requirement for a buyer's post-closing working capital position?","url":"https://dealroom.so/sba-7a/questions/what-is-the-sba-s-requirement-for-a-buyer-s-post-closing-working-capital-position"}]},"caveats":["Definitions represent DealRoom's plain-English interpretation for buyers; verify regulatory terms against the official SBA and eCFR sources listed.","Not legal, tax, or financial advice, and not an SBA eligibility determination."],"citation":{"label":"DealRoom.so Glossary — Arm's length","url":"https://dealroom.so/glossary/arm-s-length","source_type":"DealRoom Data"}}