For SBA lenders
Short answer
When acquiring a business from an immediate family member, the lender must conduct enhanced due diligence to ensure the transaction is arm's length and that the buyer has adequate management experience and equity injection that isn't recycled from the seller.
Family-member acquisitions are subject to heightened scrutiny to prevent circumvention of SBA rules, such as equity injection requirements or improper use of loan proceeds. The purchase price must be supported by an independent valuation, and the buyer must demonstrate independent management experience and a bona fide equity injection.
A son is buying his father's auto repair shop for $800,000. The lender must obtain a comprehensive business valuation by an independent third party, verify the son's equity injection funds are from his own sources (not gifted or loaned by the father), and confirm the son's management experience.
13 CFR Part 120 — Business Loans
Office of the Federal Register · Federal regulation
SOP 50 10 - Lender and Development Company Loan Programs
SBA Form 1919 - Borrower Information Form
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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