# Can my company use an SBA loan to buy a competitor?

**Short answer:** Yes, as a Business Expansion. It needs at least two full fiscal years under current ownership and must buy 100% of a business in the same four-digit NAICS group. Coverage is 1.15:1. Source: SOP 50 10 8.1, App. 15, Para. A.1.b.

Canonical page: https://www.sbaexpress.loans/answers/buy-competitor-sba-business-expansion/
Last checked: 2026-11-08

Yes. SOP 50 10 8.1, Appendix 15, Para. A.1.b, treats it as a Business Expansion when these conditions are met:

- Your business has operated for at least two full fiscal years under current ownership.
- It buys 100% of the ownership interest in the other business.
- The target is in the same four-digit NAICS Industry Group.
- The deal results in at least as many full personal guarantors as your existing ownership required.

Your operating business must be the borrower. If the target will operate as a separate entity, both companies are co-borrowers.

## Why this category helps

- Coverage is 1.15:1 rather than 1.25:1 (Para. C.2.b).
- The lender may reduce or waive equity if the borrower has enough liquidity and no negative net worth (Para. C.2.a).

## What still applies

- A Quality of Earnings report is required at a price of $3,000,000 or more.
- The seller must exit, with consulting capped at 24 months.
- The combined size of your company and the target must meet SBA size standards (Section A, Ch. 1, Para. D.2).

## A target in another industry

A purchase outside your four-digit NAICS group does not qualify as a Business Expansion. Initial Acquisition is the default category, with its higher coverage and fixed equity (Para. A.1).

## Sources

- [SOP 50 10 8.1, App. 15, Para. A.1.b (about p. 365)](https://legacy.sba.gov/sites/default/files/2026-10/SOP%2050%2010%208.1%20Technical%20Policy%20Updates%20effective%20%2010.1.2026.docx)
- [SOP 50 10 8.1, App. 15, Para. C.2 (about pp. 374-377)](https://legacy.sba.gov/sites/default/files/2026-10/SOP%2050%2010%208.1%20Technical%20Policy%20Updates%20effective%20%2010.1.2026.docx)
- [SOP 50 10 8.1, App. 15, Para. C.1.b (about p. 372)](https://legacy.sba.gov/sites/default/files/2026-10/SOP%2050%2010%208.1%20Technical%20Policy%20Updates%20effective%20%2010.1.2026.docx)
- [SOP 50 10 8.1, Sec. A, Ch. 1, Para. D.2 (p. 14)](https://legacy.sba.gov/sites/default/files/2026-10/SOP%2050%2010%208.1%20Technical%20Policy%20Updates%20effective%20%2010.1.2026.docx)