For SBA lenders
Short answer
The seller in a 7(a) business acquisition must fully divest ownership and control, cannot have a conflict of interest, and often provides a seller note on full standby to support the buyer's equity.
The seller's role is to facilitate the transfer of the viable business to the buyer. They generally cannot retain ownership or control (exceptions for very small, passive minority stakes), must disclose all liabilities, and often provide financing in the form of a seller note that is on full standby to the SBA loan for its full term, strengthening the buyer's equity.
For a $1,000,000 acquisition, the seller agrees to sell 100% of the stock, resigns from all positions, and provides a $100,000 seller note on full standby to the SBA loan, with no payments until the SBA loan is repaid.
Insider move
Lenders are vigilant about preventing any actual or perceived seller control post-acquisition, ensuring the seller note terms comply with SBA standby requirements, and verifying the seller is not attempting to retain benefits or influence over the business.
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.
More on change-of-ownership underwriting
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