{"ok":true,"canonical_url":"https://dealroom.so/sba-7a/questions/what-distinguishes-a-company-redemption-from-a-cross-purchase-buyout-for-sba","api_url":"https://dealroom.so/api/public/questions/what-distinguishes-a-company-redemption-from-a-cross-purchase-buyout-for-sba","question":"What distinguishes a company redemption from a cross-purchase buyout for SBA?","topic":"Partner & owner buyout","audience":"borrower","bot_mode":"buyer","short_answer":"A company redemption involves the business buying its own shares, while a cross-purchase is the remaining owner(s) buying shares directly from the departing partner.","rule":"For SBA purposes, a company redemption, where the business uses its assets or new debt to buy back its own stock, is generally prohibited. A cross-purchase, where the acquiring individual(s) directly purchase the shares from the departing partner, is the permissible structure for an SBA 7(a) loan.","example":"If Partner A wants to exit, a company redemption would have 'ABC Corp' pay Partner A for their shares. In a cross-purchase, Partner B (remaining owner) would pay Partner A directly for their shares, using the SBA loan funds.","what_lenders_check":"Lenders ensure the transaction is structured as a cross-purchase to avoid prohibited company redemptions. They verify that the loan proceeds flow directly from the lender to the acquiring owner(s) and then to the departing partner for the purchase of shares.","required_facts":["Company redemption prohibited","Cross-purchase permissible","Loan to acquiring owner","Direct share transfer"],"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 the company itself redeem the departing partner's shares with an SBA loan?","url":"https://dealroom.so/sba-7a/questions/can-the-company-itself-redeem-the-departing-partner-s-shares-with-an-sba-loan"}],"related_terms":[{"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":"Owner Buyout","url":"https://dealroom.so/glossary/owner-buyout"},{"term":"SBA resource partner","url":"https://dealroom.so/glossary/sba-resource-partner"},{"term":"Cross-Collateralization","url":"https://dealroom.so/glossary/cross-collateralization"},{"term":"Buyout","url":"https://dealroom.so/glossary/buyout"}],"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/what-distinguishes-a-company-redemption-from-a-cross-purchase-buyout-for-sba","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."]}