{"ok":true,"canonical_url":"https://dealroom.so/sba-7a/questions/can-the-company-itself-redeem-the-departing-partner-s-shares-with-an-sba-loan","api_url":"https://dealroom.so/api/public/questions/can-the-company-itself-redeem-the-departing-partner-s-shares-with-an-sba-loan","question":"Can the company itself redeem the departing partner's shares with an SBA loan?","topic":"Partner & owner buyout","audience":"borrower","bot_mode":"buyer","short_answer":"No, generally an SBA 7(a) loan cannot be used for a company to redeem its own shares from a departing partner.","rule":"SBA policy typically prohibits the use of loan proceeds for stock redemptions by the business itself. The loan must be made to an eligible borrower (the acquiring individual or entity) for an eligible purpose, which usually means the acquiring individual directly purchases the shares from the departing partner (a cross-purchase).","example":"Instead of ABC LLC buying back shares from Partner A using an SBA loan, Partner B (the remaining owner) would personally apply for the SBA loan to purchase Partner A's shares directly from Partner A.","what_lenders_check":"Lenders ensure the transaction is structured as a direct purchase of shares by the remaining owner(s) from the departing partner, avoiding any direct redemption by the company. This prevents the perception of the business using loan funds to reduce its equity.","required_facts":["Company redemption prohibited","Cross-purchase preferred","Loan to acquiring owner","Direct share purchase"],"source_families":["SOP 50 10 — Lender and Development Company Loan Programs","13 CFR Part 120 — Business Loans"],"official_sources":[{"title":"SOP 50 10 — Lender and Development Company Loan Programs","url":"https://www.sba.gov/document/sop-50-10-lender-development-company-loan-programs"},{"title":"13 CFR Part 120 — Business Loans","url":"https://www.ecfr.gov/current/title-13/chapter-I/part-120"}],"related_questions":[{"question":"Can I buy out my business partner with an SBA 7(a) loan?","url":"https://dealroom.so/sba-7a/questions/can-i-buy-out-my-business-partner-with-an-sba-7-a-loan"},{"question":"Can a partner buyout be done with zero money down under the SBA?","url":"https://dealroom.so/sba-7a/questions/can-a-partner-buyout-be-done-with-zero-money-down-under-the-sba"},{"question":"What is the 24-month ownership rule for a $0-down SBA partner buyout?","url":"https://dealroom.so/sba-7a/questions/what-is-the-24-month-ownership-rule-for-a-0-down-sba-partner-buyout"},{"question":"Is a partner buyout a complete or partial change of ownership for the SBA?","url":"https://dealroom.so/sba-7a/questions/is-a-partner-buyout-a-complete-or-partial-change-of-ownership-for-the-sba"},{"question":"Does the remaining owner have to personally guarantee the SBA loan after a buyout?","url":"https://dealroom.so/sba-7a/questions/does-the-remaining-owner-have-to-personally-guarantee-the-sba-loan-after-a-buyout"},{"question":"Can a seller note be used to buy out a partner, and must it be on standby?","url":"https://dealroom.so/sba-7a/questions/can-a-seller-note-be-used-to-buy-out-a-partner-and-must-it-be-on-standby"}],"related_terms":[{"term":"Lease with an option to purchase","url":"https://dealroom.so/glossary/lease-with-an-option-to-purchase"},{"term":"SBA resource partner","url":"https://dealroom.so/glossary/sba-resource-partner"},{"term":"Owner's draw","url":"https://dealroom.so/glossary/owner-s-draw"},{"term":"Owner's withdrawals","url":"https://dealroom.so/glossary/owner-s-withdrawals"},{"term":"Owner's salary","url":"https://dealroom.so/glossary/owner-s-salary"},{"term":"Partner","url":"https://dealroom.so/glossary/partner"}],"related_tools":[{"name":"Partner Buyout toolkit","url":"https://dealroom.so/sba-7a/partner-buyout"},{"name":"Find an active SBA 7(a) lender","url":"https://dealroom.so/lenders"}],"data_freshness":{"last_reviewed":"2026-06-15","sba_rule_sources_checked_through":"2026-06-15"},"citation":{"label":"DealRoom.so SBA 7(a) Q&A","url":"https://dealroom.so/sba-7a/questions/can-the-company-itself-redeem-the-departing-partner-s-shares-with-an-sba-loan","source_type":"DealRoom Q&A"},"caveats":["Grounded in the current SBA rulebook; verify against official sources before relying on it for a live deal.","Not legal, tax, or financial advice and not an approval decision."]}