SBA 7(a) Q&A
Short answer
A non-compete payment to a departing partner in a buyout can be financed by an SBA 7(a) loan, but the amount must be reasonable and properly documented.
SBA loans can finance reasonable non-compete agreements as part of a business acquisition or partner buyout. The non-compete agreement must be in writing, specify the terms, and reflect fair market value for preventing competition. The lender will assess its reasonableness and ensure it is not merely a way to inflate the business purchase price.
In a $500,000 partner buyout, $50,000 is allocated for a 3-year non-compete agreement with the departing partner. This $50,000 can be included in the SBA 7(a) loan amount, subject to lender approval of its terms and value.
Lenders scrutinize non-compete payments to ensure they are justifiable business expenses and not excessive, which could reduce the business's cash flow or be an attempt to circumvent SBA loan limits or equity injection requirements. They verify the agreement's enforceability and relevance.
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 2026-06-13. 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.
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