For SBA lenders
Short answer
The SBA expects purchase agreements to contain standard representations and warranties from the seller regarding the business's financial condition, assets, liabilities, legal status, and absence of undisclosed issues. These are crucial for underwriting.
For change-of-ownership transactions, the SBA requires the lender to ensure the purchase agreement is commercially reasonable and protects the lender's interest. This includes standard buyer protections like representations and warranties from the seller that the financial statements are accurate, assets are unencumbered (except as disclosed), there are no undisclosed liabilities, and the business is in good standing. This mitigates risks for the new owner and the lender.
In a $1.2 million business acquisition, the lender reviews the purchase agreement to confirm it includes seller representations that financial statements provided are accurate, there are no undisclosed liens, and all material contracts are disclosed, ensuring a sound basis for underwriting.
Insider move
Lenders must ensure the purchase agreement adequately protects the buyer and the SBA's collateral position. Weak or absent representations and warranties can expose the lender to unforeseen liabilities and potentially lead to a guaranty repair.
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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