SBA Business Acquisition Loans – Recent Policy Changes

Source: Small Business Administration Standard Operating Process (SOP)

The revised Small Business Administration (SBA) Standard Operating Process (SOP) 50 10 7.1 took effect in November 2023. There were several changes that could be very impactful to small business owners and their access to capital.

This article is the first in a 4-part series on important policy and process changes, and we start with Business Acquisition Loans. We’ll break down the most impactful changes for small business owners.

Business Acquisition Loans

Equity Injection – The SBA will still require an equity injection of 10% of the Total Project Cost of the transaction. However, they changed how that injection can come.

  • The Seller can provide all or part of the required equity injection with a seller note on full standby for at least 24 months. The seller note cannot have a balloon payment.
  • The Seller note can be on partial standby (interest payments only being made) if:
    • At least 25% of the required equity is coming from a source other than the seller note, and
    • The historical business cash flow supports the ability to make the interest payments.

Seller Earnouts / Buyer Rebates

  • Seller earnouts are prohibited.
  • Rebates to buyer based on business performance are allowed.
    • Most often this will be a seller note with an offset. A seller note with this structure cannot be used as part of equity injection.
    • If the borrower receives funds based on the rebate (not a seller note, actual funds transfer), those funds must be applied to pay down the SBA loan up to 25% of the outstanding balance.

Partial Change of Ownership

  • SBA has made eligible sale of partial ownership in a business. Loan proceeds may be used to fund the purchase of a portion of one or more owner’s interest in the business or of the business itself.
  • Both the business and the individual owner(s) who is acquiring the ownership interest must be co-borrowers on the loan.
  • Anyone that owns 20% or more of the business post transaction must provide an unlimited personal guarantee on the loan.

Business Acquisitions with Real Estate

  • If 51% or more of purchase price is for real estate, term of loan can be up to 25 years.
  • If less than 51% of purchase price is for real estate, a blended term based on the use of proceeds is allowed.

Please don’t hesitate to reach out for our fractional-use CFO support to help navigate these shifts in regulatory requirements and secure an attractive, SBA-backed Business Acquisition Loan.

About BELAY Financial LLC

BELAY Financial LLC ( provides flexible contract CFO & Controller services to entrepreneurial companies. The firm specializes in cost-effective financial reporting, budgeting & forecasting, implementing controls, complex modeling, valuing businesses, and other financial management. Most of the firm’s clients are growing technology, healthcare, business services, consumer, and industrial companies at various stages of development from start-up to tens of millions in annual revenue. BELAY Financial has a team of more than 45 professionals serving more than 120 companies, and is part of BELAY Solutions, a national firm providing virtual assistants, social media management, and accounting services to small companies.