For SBA lenders
Short answer
If the seller retains ownership of the real estate and the buyer leases it, the lender must ensure the lease terms are reasonable and that the seller does not gain an advantage over the SBA loan, especially if the seller also holds a standby note.
The SBA scrutinizes transactions where a seller retains real estate and becomes the landlord to the acquiring business. The lease terms (length, rent amount) must be at arm's length and market-based. The SBA wants to prevent situations where high rent payments could impair the borrower's ability to repay the SBA loan, or where the seller gains an unapproved benefit if they also provided a standby note.
A borrower acquires a manufacturing business for $1M, but the seller retains the real estate and leases it back to the buyer for 10 years at $10,000/month. The lender would require an independent appraisal of the real estate to confirm the rent is market-rate, and ensure no terms in the lease create an undue burden or an unapproved benefit to a seller who has a standby note.
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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