{"ok":true,"canonical_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","api_url":"https://dealroom.so/api/public/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, does the SBA require the business to pass a cash flow test post-acquisition?","topic":"Partner buyouts","audience":"borrower","bot_mode":"buyer","short_answer":"Yes, the SBA requires the business to demonstrate sufficient projected cash flow post-acquisition to cover all debt service, including the SBA loan.","rule":"For any business acquisition, including partner buyouts, the SBA's primary concern is the ability of the business to generate enough cash flow to repay the loan. Lenders must underwrite the transaction based on the projected cash flow after the buyout, ensuring that the business can service the new debt, cover operating expenses, and provide reasonable owner's compensation.","example":"A buyer uses an SBA loan for a $400,000 partner buyout. The lender projects the business's post-acquisition cash flow, including the new debt service, and confirms it maintains a minimum Debt Service Coverage Ratio (DSCR) of 1.15x to ensure repayment ability.","what_lenders_check":"Lenders focus on the business's historical and projected financial performance. For a buyout, they carefully analyze how the change in ownership and any new debt will impact the business's ability to generate sufficient cash flow for repayment.","required_facts":["Cash flow test","Partner buyout","Debt service coverage","Repayment ability","Post-acquisition projections"],"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/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"}],"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, 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"},{"question":"What is the importance of a non-compete agreement from the seller in an SBA 7(a) acquisition?","url":"https://dealroom.so/sba-7a/questions/what-is-the-importance-of-a-non-compete-agreement-from-the-seller-in-an-sba-7-a-acquisitio"}],"related_terms":[{"term":"Buyout of a Partner","url":"https://dealroom.so/glossary/buyout-of-a-partner"},{"term":"SBA resource partner","url":"https://dealroom.so/glossary/sba-resource-partner"},{"term":"Pass-Through","url":"https://dealroom.so/glossary/pass-through"},{"term":"M&A advisor","url":"https://dealroom.so/glossary/ma-advisor"},{"term":"Ability to repay","url":"https://dealroom.so/glossary/ability-to-repay"},{"term":"Repair to the guaranty","url":"https://dealroom.so/glossary/repair-to-the-guaranty"}],"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":"2026-06-14","sba_rule_sources_checked_through":"2026-06-14"},"citation":{"label":"DealRoom.so SBA 7(a) Q&A","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","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."]}