{"ok":true,"canonical_url":"https://dealroom.so/glossary/arm-s-length-transaction","api_url":"https://dealroom.so/api/public/glossary/arm-s-length-transaction","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-transaction","term":"Arm's-Length Transaction","group":"Doing the deal","definition":"A transaction where both buyer and seller act independently and in their own self-interest, without any pre-existing relationship or undue influence. This ensures fair market terms.","what_it_means":"SBA loans mandate that transactions must be conducted at arm's length to ensure fair market value and prevent conflicts of interest. This means the buyer and seller cannot be related parties. If any pre-existing relationship exists, the lender will scrutinize it intensely to confirm the transaction genuinely meets this independent standard, which is critical for loan approval.","url":"https://dealroom.so/glossary/arm-s-length-transaction","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":"related-party-transaction","term":"Related-Party Transaction","url":"https://dealroom.so/glossary/related-party-transaction"},{"slug":"fair-market-value","term":"Fair market value","url":"https://dealroom.so/glossary/fair-market-value"},{"slug":"conflict-of-interest","term":"Conflict of interest","url":"https://dealroom.so/glossary/conflict-of-interest"},{"slug":"business-appraisal","term":"Business Appraisal","url":"https://dealroom.so/glossary/business-appraisal"}],"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":"How does the SBA handle a seller's retained ownership in a change-of-ownership transaction?","url":"https://dealroom.so/for-lenders/questions/how-does-the-sba-handle-a-seller-s-retained-ownership-in-a-change-of-ownership-transaction"},{"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 the SBA handle a seller's retained ownership in a 7(a) change-of-ownership transaction?","url":"https://dealroom.so/for-lenders/questions/how-does-the-sba-handle-a-seller-s-retained-ownership-in-a-7-a-change-of-ownership-transac"}]},"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 Transaction","url":"https://dealroom.so/glossary/arm-s-length-transaction","source_type":"DealRoom Data"}}