{"ok":true,"canonical_url":"https://dealroom.so/glossary/arms-length","api_url":"https://dealroom.so/api/public/glossary/arms-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":"arms-length","term":"Arms-length","group":"Doing the deal","definition":"This describes a transaction where both buyer and seller are independent, acting in their own self-interest, and have no pre-existing relationship that could influence the deal terms.","what_it_means":"The SBA prefers arms-length transactions because they're less prone to conflicts of interest or inflated valuations. If your deal isn't strictly arms-length, such as with a family member or business partner, the SBA will require additional documentation and scrutiny to ensure fair market value and legitimate business purpose.","url":"https://dealroom.so/glossary/arms-length","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":"family-member-transaction","term":"Family member transaction","url":"https://dealroom.so/glossary/family-member-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-valuation","term":"Business valuation","url":"https://dealroom.so/glossary/business-valuation"}],"related_questions":[{"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":"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-"}]},"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 — Arms-length","url":"https://dealroom.so/glossary/arms-length","source_type":"DealRoom Data"}}