For SBA lenders
Short answer
A seller can retain a minority equity stake (less than 20%) in the business post-acquisition, but they generally cannot remain an officer, director, or key employee, and their remaining equity cannot be financed by the SBA loan.
The SBA aims to finance actual changes of ownership. If a seller retains equity, it must be a true minority position (under 20%) and they must not exert control or influence over the business. Their continued involvement as a consultant may be allowed, but not in a management capacity. Their remaining equity cannot be part of the financing.
Buyer 'A' is acquiring 'XYZ Company' for $1,000,000. The seller agrees to sell 90% of the company, retaining a 10% equity stake. The SBA 7(a) loan can finance the 90% purchase, but the seller cannot remain on the board or as CEO, and their 10% stake cannot be financed by the loan proceeds.
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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