{"ok":true,"canonical_url":"https://dealroom.so/sba-7a/questions/for-a-partner-buyout-what-if-the-departing-partner-also-has-a-non-compete-payment","api_url":"https://dealroom.so/api/public/questions/for-a-partner-buyout-what-if-the-departing-partner-also-has-a-non-compete-payment","question":"For a partner buyout, what if the departing partner also has a non-compete payment?","topic":"Partner buyouts","audience":"borrower","bot_mode":"buyer","short_answer":"A non-compete payment to a departing partner in a buyout can be financed by an SBA 7(a) loan, but the amount must be reasonable and properly documented.","rule":"SBA loans can finance reasonable non-compete agreements as part of a business acquisition or partner buyout. The non-compete agreement must be in writing, specify the terms, and reflect fair market value for preventing competition. The lender will assess its reasonableness and ensure it is not merely a way to inflate the business purchase price.","example":"In a $500,000 partner buyout, $50,000 is allocated for a 3-year non-compete agreement with the departing partner. This $50,000 can be included in the SBA 7(a) loan amount, subject to lender approval of its terms and value.","what_lenders_check":"Lenders scrutinize non-compete payments to ensure they are justifiable business expenses and not excessive, which could reduce the business's cash flow or be an attempt to circumvent SBA loan limits or equity injection requirements. They verify the agreement's enforceability and relevance.","required_facts":["Non-compete agreement","Reasonable value","Written terms","Fair market assessment"],"source_families":["SOP 50 10 - Lender and Development Company Loan Programs","13 CFR Part 120 - Business Loans","7(a) Loan Program Terms, Conditions, and Eligibility"],"official_sources":[{"title":"SOP 50 10 - Lender and Development Company Loan Programs","url":"https://www.sba.gov/sites/default/files/2025-05/SOP%2050%2010%208%20Technical%20Updates%20effective%206.1.2025.docx"},{"title":"13 CFR Part 120 - Business Loans","url":"https://www.ecfr.gov/current/title-13/chapter-I/part-120"},{"title":"7(a) Loan Program Terms, Conditions, and Eligibility","url":"https://www.sba.gov/partners/lenders/7a-loan-program/terms-conditions-eligibility"}],"related_questions":[{"question":"If I'm buying out a partner, does the remaining partner also need to personally guarantee the SBA loan for $500,000?","url":"https://dealroom.so/sba-7a/questions/if-i-m-buying-out-a-partner-does-the-remaining-partner-also-need-to-personally-guarantee-t"},{"question":"If I am buying out a partner, does the SBA require the business to pass a cash flow test post-acquisition?","url":"https://dealroom.so/sba-7a/questions/if-i-am-buying-out-a-partner-does-the-sba-require-the-business-to-pass-a-cash-flow-test-po"},{"question":"If I am buying out a partner, how does the SBA ensure the purchase price is fair and justifiable?","url":"https://dealroom.so/sba-7a/questions/if-i-am-buying-out-a-partner-how-does-the-sba-ensure-the-purchase-price-is-fair-and-justif"},{"question":"Can an SBA 7(a) loan be used to purchase a business if the seller will retain a minority ownership stake?","url":"https://dealroom.so/sba-7a/questions/can-an-sba-7-a-loan-be-used-to-purchase-a-business-if-the-seller-will-retain-a-minority-ow"},{"question":"What are the requirements for the seller in an SBA 7(a) business acquisition loan?","url":"https://dealroom.so/sba-7a/questions/what-are-the-requirements-for-the-seller-in-an-sba-7-a-business-acquisition-loan"},{"question":"Can an SBA 7(a) loan be used to fund a partner buyout with an earn-out provision?","url":"https://dealroom.so/sba-7a/questions/can-an-sba-7-a-loan-be-used-to-fund-a-partner-buyout-with-an-earn-out-provision"}],"related_terms":[{"term":"Non-Compete Payment","url":"https://dealroom.so/glossary/non-compete-payment"},{"term":"Buyout of a Partner","url":"https://dealroom.so/glossary/buyout-of-a-partner"},{"term":"Partner buyout","url":"https://dealroom.so/glossary/partner-buyout"},{"term":"Non-compete","url":"https://dealroom.so/glossary/non-compete"},{"term":"Non-Compete Agreement","url":"https://dealroom.so/glossary/non-compete-agreement"},{"term":"Demand for Payment","url":"https://dealroom.so/glossary/demand-for-payment"}],"related_tools":[{"name":"SBA 7(a) payment & fee calculator","url":"https://dealroom.so/sba-7a/calculator"},{"name":"Find an active SBA 7(a) lender","url":"https://dealroom.so/lenders"}],"data_freshness":{"last_reviewed":"2026-06-13","sba_rule_sources_checked_through":"2026-06-13"},"citation":{"label":"DealRoom.so SBA 7(a) Q&A","url":"https://dealroom.so/sba-7a/questions/for-a-partner-buyout-what-if-the-departing-partner-also-has-a-non-compete-payment","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."]}