{"ok":true,"canonical_url":"https://dealroom.so/glossary/arm-s-length-lease-agreement","api_url":"https://dealroom.so/api/public/glossary/arm-s-length-lease-agreement","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-lease-agreement","term":"Arm's-length lease agreement","group":"Doing the deal","definition":"A lease negotiated independently between two unrelated parties, ensuring fair market terms without preferential treatment. Buyers care because the SBA requires this if you're leasing property from the seller or a related entity, ensuring the rent is legitimate and market-based.","what_it_means":"If the seller (or an affiliate) will be your landlord post-acquisition, the SBA mandates an arm's-length lease. This means the rent must be at fair market value, supported by an appraisal or market analysis, and the lease terms cannot be overly favorable to either party. Your lender will scrutinize this.","url":"https://dealroom.so/glossary/arm-s-length-lease-agreement","official_sources":[{"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"},{"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"}],"related":[{"slug":"lease-agreement","term":"Lease agreement","url":"https://dealroom.so/glossary/lease-agreement"},{"slug":"owner-occupied-commercial-real-estate","term":"Owner-occupied commercial real estate","url":"https://dealroom.so/glossary/owner-occupied-commercial-real-estate"},{"slug":"appraisal","term":"Appraisal","url":"https://dealroom.so/glossary/appraisal"},{"slug":"arm-s-length","term":"Arm's length","url":"https://dealroom.so/glossary/arm-s-length"}],"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 happens if the business's current lease agreement for its premises is short-term or expiring soon?","url":"https://dealroom.so/sba-7a/questions/what-happens-if-the-business-s-current-lease-agreement-for-its-premises-is-short-term-or-e"},{"question":"Does a shared commercial lease agreement between two separate businesses trigger affiliation for SBA size standards?","url":"https://dealroom.so/for-lenders/questions/does-a-shared-commercial-lease-agreement-between-two-separate-businesses-trigger-affiliati"},{"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":"Can a buyer contribute a pre-paid lease agreement for the business premises as part of their equity injection?","url":"https://dealroom.so/sba-7a/questions/can-a-buyer-contribute-a-pre-paid-lease-agreement-for-the-business-premises-as-part-of-the"}]},"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 lease agreement","url":"https://dealroom.so/glossary/arm-s-length-lease-agreement","source_type":"DealRoom Data"}}