SBA 7(a) Q&A
Short answer
A non-compete agreement from the seller is crucial for an SBA 7(a) acquisition to protect the goodwill and continued operation of the acquired business.
The SBA considers a non-compete agreement a critical element in change of ownership transactions. It ensures the seller does not immediately compete with the buyer, safeguarding the value of the acquired business and its goodwill. The agreement must be reasonable in scope, duration, and geographic area.
A buyer acquires a consulting firm. A non-compete agreement prevents the seller from opening a competing consulting business within a 50-mile radius for five years, ensuring client retention and the transfer of goodwill to the new owner.
Insider move
Lenders require a legally enforceable non-compete agreement to protect the business's future cash flow and the loan's collateral. They ensure the terms are reasonable and support the long-term success of the acquired business under new ownership.
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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