SBA rules · SOP 50 10 8.1
How long is an SBA loan to buy a business?
A 7(a) loan facilitating a change of ownership has a maximum maturity of 10 years, unless it includes real estate eligible for a blended maturity or meets the 25-year Special Purpose Property exemption.
Quoted from SBA SOP 50 10 8.1Every quote checked word for word
In detail
- General limit: A 7(a) loan that facilitates a change of ownership must have a stated amortization and loan maturity that does not exceed 10 years, and balloon payments are prohibited.
- Blended maturity with real estate: When a change of ownership includes purchasing real estate, the lender may finance the transaction via separate loans or blend the maturity on a weighted average basis rounded to the nearest full year, allocating up to 25 years to the real estate portion and 10 years to all other uses. The standard rule that allows a 25-year maturity when real estate makes up 51% or more of loan proceeds does not apply to changes of ownership.
- Special Purpose Property exemption: A lender may structure a change of ownership loan with a maturity of up to 25 years if the transaction involves acquiring an owner-occupied Special Purpose Property and the operating business, 85% or more of the total project costs are for real estate, and the real estate is integral to the acquisition and ongoing operation of the business.
The source
What the SOP says
“7(a) loans that facilitate a change of ownership must not have an amortization that exceeds 10 years, except as provided below for transactions involving Special Purpose Properties.
“When loan proceeds are used to fund a change of ownership and purchase real estate, the maturity may be blended based on the weighted average use of proceeds. Only the portion of the real estate purchase may have an amortization that exceeds 10-years, up to a maximum of a 25-year term. All other uses of proceeds, including those related to soft costs and working capital, must be allocated a 10-year term.
“For transactions involving the acquisition of an owner-occupied Special Purpose Property which includes the business operating from that property, the Lender may also structure the loan with a maturity of up to 25 years if 85% or more of the use of the total project costs are for real estate.
“For any loan financing a change of ownership, Appendix 15 governs and the 51% real estate maturity option does not apply.
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This page quotes the SBA's Standard Operating Procedure 50 10 8.1. Lenders can ask for more than the SBA minimum. It is general information, not a loan approval or legal advice.