{"ok":true,"canonical_url":"https://dealroom.so/for-lenders/questions/what-specific-representations-and-warranties-does-the-sba-expect-in-a-purchase-agreement-f","api_url":"https://dealroom.so/api/public/questions/what-specific-representations-and-warranties-does-the-sba-expect-in-a-purchase-agreement-f","question":"What specific representations and warranties does the SBA expect in a purchase agreement for a change-of-ownership loan?","topic":"Change-of-Ownership Underwriting","audience":"lender","bot_mode":"lender","short_answer":"The SBA expects purchase agreements to contain standard representations and warranties from the seller regarding the business's financial condition, assets, liabilities, legal status, and absence of undisclosed issues. These are crucial for underwriting.","rule":"For change-of-ownership transactions, the SBA requires the lender to ensure the purchase agreement is commercially reasonable and protects the lender's interest. This includes standard buyer protections like representations and warranties from the seller that the financial statements are accurate, assets are unencumbered (except as disclosed), there are no undisclosed liabilities, and the business is in good standing. This mitigates risks for the new owner and the lender.","example":"In a $1.2 million business acquisition, the lender reviews the purchase agreement to confirm it includes seller representations that financial statements provided are accurate, there are no undisclosed liens, and all material contracts are disclosed, ensuring a sound basis for underwriting.","what_lenders_check":"Lenders must ensure the purchase agreement adequately protects the buyer and the SBA's collateral position. Weak or absent representations and warranties can expose the lender to unforeseen liabilities and potentially lead to a guaranty repair.","required_facts":["Purchase agreement","Representations and warranties","Change-of-ownership","Underwriting","Seller disclosures"],"source_families":["SOP 50 10 - Lender and Development Company Loan Programs","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":"7(a) Loan Program Terms, Conditions, and Eligibility","url":"https://www.sba.gov/partners/lenders/7a-loan-program/terms-conditions-eligibility"}],"related_questions":[{"question":"What specific due diligence is required for a 7(a) loan involving a change of ownership between related parties?","url":"https://dealroom.so/for-lenders/questions/what-specific-due-diligence-is-required-for-a-7-a-loan-involving-a-change-of-ownership-bet"},{"question":"How does a lender evaluate the management experience of a buyer who has no prior experience in the target industry?","url":"https://dealroom.so/for-lenders/questions/how-does-a-lender-evaluate-the-management-experience-of-a-buyer-who-has-no-prior-experienc"},{"question":"What happens if the business being acquired has significant outstanding tax liabilities at closing?","url":"https://dealroom.so/for-lenders/questions/what-happens-if-the-business-being-acquired-has-significant-outstanding-tax-liabilities-at"},{"question":"When is an independent business appraisal required for a change of ownership transaction exceeding $500,000?","url":"https://dealroom.so/for-lenders/questions/when-is-an-independent-business-appraisal-required-for-a-change-of-ownership-transaction-e"},{"question":"How does the SBA evaluate the reasonableness of goodwill in a 7(a) change-of-ownership transaction?","url":"https://dealroom.so/for-lenders/questions/how-does-the-sba-evaluate-the-reasonableness-of-goodwill-in-a-7-a-change-of-ownership-tran"},{"question":"What is the primary factor in determining SBA 7(a) loan eligibility for a business acquisition when the seller retains a minority equity stake?","url":"https://dealroom.so/for-lenders/questions/what-is-the-primary-factor-in-determining-sba-7-a-loan-eligibility-for-a-business-acquisit"}],"related_terms":[{"term":"Representations and warranties","url":"https://dealroom.so/glossary/representations-and-warranties"},{"term":"Change in ownership","url":"https://dealroom.so/glossary/change-in-ownership"},{"term":"Purchase agreement","url":"https://dealroom.so/glossary/purchase-agreement"},{"term":"Stock purchase agreement","url":"https://dealroom.so/glossary/stock-purchase-agreement"},{"term":"Specific Lien","url":"https://dealroom.so/glossary/specific-lien"},{"term":"SBA 7(a) program","url":"https://dealroom.so/glossary/sba-7-a-program"}],"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/for-lenders/questions/what-specific-representations-and-warranties-does-the-sba-expect-in-a-purchase-agreement-f","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."]}