SBA 7(a) Q&A
Short answer
Yes, a non-compete agreement from the departing partner is typically required for an SBA-financed buyout.
The SBA generally requires non-compete agreements from selling partners in business acquisitions to protect the value of the acquired business, especially its goodwill. This agreement ensures the departing partner does not immediately compete with the business, potentially eroding its customer base and profitability. The non-compete must be reasonable in scope, duration, and geography.
In a $750,000 partner buyout of a local restaurant, the departing partner would typically be required to sign a non-compete clause, preventing them from opening a similar restaurant within a certain radius for a specified number of years.
Lenders view non-compete agreements as crucial for preserving the business's goodwill and ensuring its future cash flow, which is vital for loan repayment. They verify the agreement is legally enforceable and protects the buyer's investment.
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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