SBA 7(a) Q&A
Short answer
A company redemption involves the business buying its own shares, while a cross-purchase is the remaining owner(s) buying shares directly from the departing partner.
For SBA purposes, a company redemption, where the business uses its assets or new debt to buy back its own stock, is generally prohibited. A cross-purchase, where the acquiring individual(s) directly purchase the shares from the departing partner, is the permissible structure for an SBA 7(a) loan.
If Partner A wants to exit, a company redemption would have 'ABC Corp' pay Partner A for their shares. In a cross-purchase, Partner B (remaining owner) would pay Partner A directly for their shares, using the SBA loan funds.
Lenders ensure the transaction is structured as a cross-purchase to avoid prohibited company redemptions. They verify that the loan proceeds flow directly from the lender to the acquiring owner(s) and then to the departing partner for the purchase of shares.
13 CFR Part 120 — Business Loans
Office of the Federal Register · Federal regulation
SOP 50 10 — Lender and Development Company Loan Programs
U.S. Small Business Administration · SBA Standard Operating Procedure
Last checked 2026-06-15. Official sources control — verify before relying on any rule for a live deal.
Last reviewed 2026-06-15 · SBA sources checked through 2026-06-15. DealRoom analysis of the current SBA 7(a) rulebook for change-of-ownership / partner buyouts. 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.
More on partner & owner buyout
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This page answers “What distinguishes a company redemption from a cross-purchase buyout for SBA?” for SBA 7(a) business buyers — a short answer, the detail, and official sources — from DealRoom.so SBA Intelligence. It is general information, not legal, tax, or financial advice, and DealRoom is not a lender.
Source: DealRoom.so SBA Intelligence, based on public SBA, lender, franchise, FDIC, and related records. DealRoom is not a lender and does not guarantee financing.
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