For SBA lenders
Short answer
Leasing property from an affiliate is permissible, but the lender must ensure the lease terms are at fair market value and are on arm's-length terms to prevent undue enrichment or misdirection of loan proceeds.
While not automatically disqualifying, transactions between affiliates (e.g., a borrower leasing from an entity owned by its principal owner) require heightened scrutiny. The lender must document that the lease rate is at or below market rates, that the terms are reasonable, and that the arrangement does not constitute an ineligible use of loan proceeds or create an unfair advantage for the affiliate. An independent appraisal of the lease rate may be required.
A borrower is acquiring a business and plans to lease the real estate from a company owned by the borrower's spouse. The lender obtains an independent appraisal or market rent analysis to confirm the proposed lease rate of $5,000/month is at fair market value, protecting against self-dealing.
Insider move
Lenders must be diligent in assessing affiliate transactions to prevent conflicts of interest, ineligible uses of proceeds, or excessive costs to the borrower. Failure to ensure arm's-length terms can lead to a guaranty repair or denial.
13 CFR Part 120 — Business Loans
Office of the Federal Register · Federal regulation
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.
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