Can an ineligible owner sell out before an SBA loan?
Short answer
Yes, if the owner completely divests before the SBA loan number is issued. A partial sale does not work. The six-month lookback does not block a full divestiture made before that date (SOP 50 10 8.1, Sec. A, Ch. 1, Para. F).
Yes. A transaction may proceed if the Ineligible Person completely divests their direct and indirect ownership before the SBA loan number is issued. See SOP 50 10 8.1, Sec. A, Ch. 1, Para. F and Information Notice 5000-877673, question 3.
Complete means all of it
Selling part of a stake does not cure the problem. No direct or indirect owner may be an Ineligible Person at any percentage.
The six-month lookback
SBA looks at owners starting 6 months before the SBA loan number is issued. The business is ineligible if any of them is an Ineligible Person. The exception is complete divestiture before that number is issued.
Who can buy
The 100% rule applies to every direct and indirect owner, so the buyer must be eligible.
Control after the sale
An agreement that gives a non-guarantor owner or investor control of the business makes it ineligible (Sec. A, Ch. 1, Para. E.3).
Guaranty lookback
The separate guaranty lookback in Sec. A, Ch. 5, Para. A excepts Ineligible Persons covered by Para. F.
Loans made before March 1, 2026
Lenders may modify ownership on those loans under SOP 50 57, as long as new owners are not Ineligible Persons. They may not increase a loan if the applicant fails the current rule (Information Notice 5000-877673, questions 5 and 6).
Sources
- SOP 50 10 8.1, Sec. A, Ch. 1, Para. F (p. 28)
- SBA Information Notice 5000-877673, question 3 (March 31, 2026)
- SBA Information Notice 5000-877673, question 5 (March 31, 2026)
- SBA Information Notice 5000-877673, question 6 (March 31, 2026)
- SOP 50 10 8.1, Sec. A, Ch. 5, Para. A (about p. 94)
- SOP 50 10 8.1, Sec. A, Ch. 1, Para. E.3 (about p. 19)
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