{"ok":true,"canonical_url":"https://dealroom.so/sba-7a/questions/if-i-am-buying-out-a-retiring-business-partner-can-my-existing-equity-in-the-business-coun","api_url":"https://dealroom.so/api/public/questions/if-i-am-buying-out-a-retiring-business-partner-can-my-existing-equity-in-the-business-coun","question":"If I am buying out a retiring business partner, can my existing equity in the business count as my down payment?","topic":"Partner buyouts","audience":"borrower","bot_mode":"buyer","short_answer":"Yes, a buyer's existing equity in a business can be recognized as part of the equity injection for a partner buyout, provided certain conditions are met.","rule":"For a partner buyout, a buyer's existing equity (ownership stake) in the business can be counted towards the required equity injection if it represents a cash injection at the time of purchase or prior retained earnings. The SBA considers this a valid contribution to the ownership change.","example":"A partner owns 50% of a business valued at $800,000 and wants to buy out their retiring partner. Their existing 50% equity ($400,000) can fulfill the minimum 10% equity injection ($80,000) for the loan to purchase the remaining 50%.","what_lenders_check":"Lenders will scrutinize the historical financial statements to verify the existing equity and ensure it reflects actual cash contributions or retained earnings, not merely goodwill. They will also confirm the terms of the buyout agreement.","required_facts":["Existing equity","Partner buyout","Retained earnings","Cash contribution","Valuation","Buyout terms"],"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, 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":"Buyout of a Partner","url":"https://dealroom.so/glossary/buyout-of-a-partner"},{"term":"Equity in real estate","url":"https://dealroom.so/glossary/equity-in-real-estate"},{"term":"Partner","url":"https://dealroom.so/glossary/partner"},{"term":"Alienate the Business","url":"https://dealroom.so/glossary/alienate-the-business"},{"term":"Consolidate Existing Business Debt","url":"https://dealroom.so/glossary/consolidate-existing-business-debt"},{"term":"Refinance existing business debt","url":"https://dealroom.so/glossary/refinance-existing-business-debt"}],"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-retiring-business-partner-can-my-existing-equity-in-the-business-coun","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."]}