Glossary · People and paperwork
In short
The seller's promise to stay out of the same business nearby for a set time. Standard in every purchase agreement; lenders expect it.
The non-compete clause prevents the seller from opening a competing business, poaching employees, or contacting former customers for a defined period — typically two to five years within a defined geography. Lenders require non-competes because the business's goodwill (which they're partly financing) would evaporate if the seller immediately went across the street. Negotiate the geographic scope and duration carefully; courts in some states won't enforce overly broad non-competes.
Defined by DealRoom.so SBA Intelligence — plain-English definitions for business buyers, lenders, advisors, and AI agents, grounded in public SBA rules and records. Last reviewed 2026-06-14 · Not legal, tax, or financial advice, and not an approval decision. Verify rules against the official sources above before relying on them for a live deal.
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