# Can the lender waive the equity injection on a partner buyout?

**Short answer:** Yes, on Business Expansions and Owner Buyouts. The lender may reduce or eliminate it if the borrower has sufficient liquidity and working capital and no negative net worth. Initial Acquisitions get no waiver. Source: SOP 50 10 8.1, App. 15, Para. C.2.a.

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Last checked: 2026-11-08

Yes, on Business Expansions and Owner Buyouts. SOP 50 10 8.1, App. 15, Para. C.2.a, lets the lender reduce or eliminate the requirement after finding the borrower has sufficient liquidity and working capital to sustain operations. An Initial Acquisition has no such option: it is 10%, which cannot be reduced or eliminated. Expansions and buyouts start at the same percentage.

## Conditions

- The applicant's balance sheet must not show negative net worth as of the last fiscal year-end.
- The lender documents how the deal qualifies for the transaction type. Initial Acquisition is the default category (App. 15, Para. A.1).

## The working capital limit

When the lender eliminates equity, it cannot include dedicated permanent working capital in this or any other 7(a) term loan within 90 days. Working capital the deal needs must come from existing cash or a line of credit. An excess of up to $10,000, or half of one percent of the loan if greater, may go to the borrower for incidental adjustments.

## How equity is measured

In an Owner Buyout, the percentage applies to the purchase price of the business, as shown in the purchase and sale agreement.

## When a buyout loses this treatment

Individuals employed by the business less than 24 months may only acquire under 50% of total equity and may not become the largest shareholder. Otherwise the deal is underwritten as an Initial Acquisition for equity, debt service coverage and Quality of Earnings (App. 15, Para. A.1.c).

employee stock ownership plan (ESOP) deals differ: there is no SBA equity requirement for a loan to an ESOP buying a controlling interest (at least 51%).

## Sources

- [SOP 50 10 8.1, App. 15, Para. C.2.a (Para. C begins p. 371)](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, Paras. A.1 and A.1.c (Para. A begins p. 362)](https://legacy.sba.gov/sites/default/files/2026-10/SOP%2050%2010%208.1%20Technical%20Policy%20Updates%20effective%20%2010.1.2026.docx)