For SBA lenders
Short answer
A seller can retain a minority ownership stake (less than 20%) in the business, but they cannot remain as an officer, director, or key employee, and their retained equity must be subordinate to the SBA loan.
For a change-of-ownership transaction, the seller's role must transition, and generally, they cannot remain in a position of control or influence over the business that would create affiliation or undermine the buyer's management. Any retained equity must be fully subordinated, typically treated as a form of equity injection.
A seller of a business takes a 15% equity stake in the new entity. The lender must ensure the seller is not an officer or director, has no management role, and their 15% equity is fully subordinated to the SBA loan.
Insider move
Lenders must scrutinize any retained seller ownership to ensure it complies with affiliation rules and does not jeopardize the buyer's control. Proper subordination of the seller's equity is critical for calculating equity injection.
13 CFR Part 120 — Business Loans
Office of the Federal Register · Federal regulation
SOP 50 10 - Lender and Development Company Loan Programs
13 CFR Part 121 - Small Business Size Regulations
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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