{"ok":true,"canonical_url":"https://dealroom.so/glossary/related-party","api_url":"https://dealroom.so/api/public/glossary/related-party","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":"related-party","term":"Related party","group":"Reading the business","definition":"Individuals or entities connected to the seller or target business through ownership, family ties, or common control. Transactions with related parties often require extra scrutiny.","what_it_means":"During due diligence, always look for transactions between the seller's business and \"related parties,\" such as family members or other businesses they own. These transactions might not be at \"arm's length\" and could inflate expenses or reduce revenue, impacting the true profitability of the business. Lenders will also scrutinize related party debt.","url":"https://dealroom.so/glossary/related-party","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"}],"related":[{"slug":"arm-s-length","term":"Arm's length","url":"https://dealroom.so/glossary/arm-s-length"},{"slug":"common-management","term":"Common management","url":"https://dealroom.so/glossary/common-management"},{"slug":"due-diligence","term":"Due diligence","url":"https://dealroom.so/glossary/due-diligence"},{"slug":"add-backs","term":"Add-backs","url":"https://dealroom.so/glossary/add-backs"}],"related_questions":[{"question":"When is an independent business valuation required for an SBA 7(a) acquisition, especially for related party transactions?","url":"https://dealroom.so/sba-7a/questions/when-is-an-independent-business-valuation-required-for-an-sba-7-a-acquisition-especially-f"},{"question":"Why does the SBA combine the size of related businesses when checking loan eligibility?","url":"https://dealroom.so/sba-loans/basics/why-does-the-sba-combine-the-size-of-related-businesses-when-checking-loan-eligibility"},{"question":"How does a lender prevent a guaranty denial related to undisclosed affiliations identified post-closing?","url":"https://dealroom.so/for-lenders/questions/how-does-a-lender-prevent-a-guaranty-denial-related-to-undisclosed-affiliations-identified"},{"question":"Can a third-party loan, not from the seller, count towards the minimum equity injection?","url":"https://dealroom.so/sba-7a/questions/can-a-third-party-loan-not-from-the-seller-count-towards-the-minimum-equity-injection"},{"question":"What specific language must a non-SBA third-party standby agreement include to ensure eligibility?","url":"https://dealroom.so/for-lenders/questions/what-specific-language-must-a-non-sba-third-party-standby-agreement-include-to-ensure-elig"},{"question":"What specific due diligence is required for a 7(a) loan involving a change of ownership between related parties?","url":"https://dealroom.so/for-lenders/questions/what-specific-due-diligence-is-required-for-a-7-a-loan-involving-a-change-of-ownership-bet"}]},"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 — Related party","url":"https://dealroom.so/glossary/related-party","source_type":"DealRoom Data"}}