SBA 7(a) Q&A
Short answer
Yes, the cost of a non-compete agreement with the seller can be an eligible use of SBA 7(a) loan proceeds as part of a business acquisition.
For business acquisitions, the SBA considers reasonable and customary costs associated with the purchase, including the value attributed to a non-compete agreement, as eligible uses of loan proceeds. This is viewed as essential to protect the value of the acquired business. The value assigned must be commercially reasonable.
You are buying a dental practice for $900,000. The purchase agreement includes a $50,000 non-compete clause with the seller. This $50,000 can be financed as part of the total SBA 7(a) acquisition loan, ensuring the seller doesn't open a competing practice nearby.
Lenders verify that the non-compete agreement is legally sound, commercially reasonable, and essential for the buyer to retain customer base and value of the acquired business. They ensure the allocated amount is justified.
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 2026-06-14. Official sources control — verify before relying on any rule for a live deal.
Last reviewed 2026-06-14 · SBA sources checked through 2026-06-14. 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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