For SBA lenders
Short answer
Yes, an SBA 7(a) loan can finance the acquisition of a business from an immediate family member, but such transactions require enhanced scrutiny and specific safeguards.
While possible, "family member transactions" are closely scrutinized due to potential conflicts of interest and to ensure the transaction is legitimate and arms-length. Key requirements include an independent business valuation, a minimum 10% cash injection from the buyer (no seller note counting as equity), and documentation that the seller will not retain any control or financial ties beyond the arm's-length seller note.
A son wants to acquire his father's plumbing business for $600,000 using a 7(a) loan. The lender requires an independent business appraisal to justify the purchase price and ensures the son provides at least a 10% cash injection from his own verifiable funds. The father must fully exit the business with no ongoing involvement.
13 CFR Part 120 — Business Loans
Office of the Federal Register · Federal regulation
7(a) Loan Program — Terms, Conditions, and Eligibility
U.S. Small Business Administration · Official SBA source
SOP 50 10 - Lender and Development Company Loan Programs
Last checked 2026-06-13. Official sources control — verify before relying on any rule for a live deal.
Last reviewed 2026-06-13 · SBA sources checked through 2026-06-13. DealRoom analysis of public SBA 7(a) lending records (FY2020–present). Grounded in the current SBA rulebook; verify against the official sources above before relying on it for a live deal. Not legal, tax, or financial advice, and not an approval decision.
More on change-of-ownership underwriting
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