SBA 7(a) Q&A
Short answer
If business real estate is held in a separate entity, documentation such as a lease agreement, management agreement, and organizational documents for both entities are needed to establish the link.
The SBA permits real estate to be held in a separate entity, but a strong operational and financial link to the operating company is required. This link is typically demonstrated through a long-term lease agreement (often with a leasehold mortgage) between the entities, and shared ownership/guaranties.
A buyer acquires an operating company, and a related entity owns the real estate. The lender requires a 20-year lease agreement between the operating company and the real estate holding company, a personal guaranty from the real estate entity owners, and copies of both entities' formation documents.
Insider move
Lenders ensure the real estate entity is closely tied to the operating business, usually through common ownership and a long-term lease. They also ensure the real estate entity's owners provide full personal guaranties and that the lease terms are commercially reasonable.
13 CFR Part 120 — Business Loans
Office of the Federal Register · Federal regulation
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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