SBA 7(a) Q&A
Short answer
In a cross-purchase agreement, each owner buys and owns a policy on every other owner, whereas in an entity-purchase (or redemption) agreement, the business itself owns a policy on each owner.
For a cross-purchase, if one owner dies, the surviving owners use the death benefit from the policies they own on the deceased to buy out the estate. For an entity-purchase, the business receives the death benefit and uses it to redeem the deceased owner's shares from their estate.
In a three-owner business, a cross-purchase would mean each owner holds two policies. An entity-purchase would involve the business holding three policies (one on each owner). If an owner dies, under entity-purchase, the business buys their shares, and the remaining ownership percentages automatically adjust among survivors. Under cross-purchase, the survivors directly buy the shares.
Last reviewed 2026-06-15 · SBA sources checked through 2026-06-15. DealRoom analysis of business life-insurance and SBA collateral-insurance practice (SOP 50 10 8). Not insurance, legal, or tax advice. 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 business life insurance & protection
Terms in this answer
← Browse all sba 7(a) questions
Pre-qualify your SBA 7(a) deal
Tell us the business, the price, and where you are — we'll point you to the lenders most likely to fund a deal like yours and flag anything that trips up approval.
Free · No documents · Usually same-day