Buying A Business With A Partner Using An SBA Loan

Can Partners Use An SBA Loan To Buy A Business?

Yes. An SBA acquisition loan is made to a business, not to a person, so it works the same whether one buyer owns 100% or three partners split the company. What changes with partners is the paperwork around ownership: who has to sign, who has to guarantee, and how each partner's money is treated.

Partnerships are common in acquisitions for good reasons. One partner often brings industry experience and the other brings capital, sales skills or financial know-how. Two people can also afford a larger, steadier business than either could alone. Lenders like that, as long as the roles are clear and every owner meets SBA's rules.

Who Signs The Loan

Most partners form a new company, usually an LLC, to make the purchase. How that company buys the business decides who the Borrower is:

SBA does not allow a 7(a) loan to be made only to individuals; the business must always be a Borrower or Co-Borrower. Which structure is better for you is a tax and legal question as much as a lending one. Our guide to asset vs stock purchases explains the trade-offs. This is general information, not tax or legal advice, so settle the structure with your CPA and attorney.

The 20% Guaranty Rule For Partners

This is the rule partners ask about most. Every individual who will own 20% or more of the business after the sale must give an unlimited personal guaranty. Ownership through another company counts too: if you own 50% of a holding company that owns 60% of the buyer, you indirectly own 30% and you guarantee.

Unlimited means each guarantor is responsible for the whole loan, not just their share of it. A 40% partner does not guarantee 40% of the debt. They guarantee all of it.

A few related rules matter:

• Spouses are combined. If you and your spouse together own 20% or more, each of you guarantees, even if neither owns 20% alone.
• The lender can ask for more. A partner under 20% who is critical to running the business can be asked to guarantee anyway.
• Personal real estate can come into it. If the business assets do not fully secure the loan, the lender must take available equity in the personal real estate of every 20%+ owner, unless that equity is under 25% of the property's value.

How Partners Split The Down Payment

For a buyer purchasing a business they do not already own, SBA requires a Down Payment of at least 10% of the total project cost. It is one requirement for the whole deal, not 10% per partner. The partners decide among themselves who puts in what.

Each partner's own cash, savings and documented gifts are unlimited sources. They can cover the entire 10% between them. The seller note on full standby, meaning no payments for the life of the SBA loan, can cover up to half. See seller notes on full standby for how that works.

Adding A Small, Passive Partner

Now say the two partners want a third, passive partner at 15%. Because that partner owns under 20% and has no control, SBA treats the money as a non-controlling minority investment. That is a limited source, and limited sources share the same half of the Down Payment as the seller note.

In the example, the seller note already uses the full $108,000 half. So the passive partner's money cannot replace any of the $108,000 the two main partners bring. Either the seller note gets smaller, or the third partner's money goes in on top of the 10%. And if minority money is used toward the Down Payment, that investor cannot receive distributions, other than enough to cover their taxes on the business's income, until the SBA loan is paid off. Our investors and the Down Payment guide covers this in detail.

Who Runs The Business

The lender's credit memo has to describe the management team and who will run the business day to day. With partners, lenders want a clear answer. In our experience, most lenders look for at least one partner who works in the business full time and has relevant industry or management experience.

A partner who is only an investor is fine. A plan where two partners both keep their full-time jobs and "oversee" the business is not. Spell out titles and duties in your resumes and business plan:

• Who is on site every day and in charge of operations
• Who handles sales, finance, hiring and the key customer relationships
• What each partner did before that prepares them for that role
• How you will make decisions if you disagree

Read what SBA lenders look for in a buyer for the full picture.

Rules Every Partner Must Meet

Each owner goes through the same checks, and one partner who does not qualify can stop the whole deal:

• U.S. citizen or U.S. national with a principal residence in the U.S. This applies to every direct and indirect owner and every guarantor; since March 1, 2026, permanent residents (green card holders) cannot own any share
• A personal financial statement from each guarantor, dated within 90 days of approval
• Personal credit reports for each owner and guarantor, which the lender reviews
• Three years of personal tax returns, and proof of where each partner's Down Payment money comes from
• A resume for each partner, focused on management and industry experience

Partner entities count as owners too. If a partner invests through their own holding company or trust, that company or trust can also be required to guarantee, and every person behind it must be disclosed.

Settle The Operating Agreement Before You Apply

Your operating agreement is between you and your partners, but the lender will read it. Work through the hard questions with your attorney early:

1. Capital contributions. Who puts in how much, and what happens if the business needs more cash later.
2. Roles and pay. Salaries for working partners, so the lender can see the operator is paid enough to cover living expenses.
3. Decisions and deadlock. How you break a tie between two 50% owners.
4. Exit and buy-sell terms. What happens if a partner wants out, divorces, becomes disabled or dies. Many lenders require life insurance on key owners.
5. Lender consent. Under SBA's closing certifications, you cannot change the ownership structure or make distributions that hurt the business's finances without the lender's written consent. Your buy-sell terms have to work within that.

If one of you later buys the other out, that is a separate change of ownership with its own SBA rules. See our partnership buyout page.

Getting Started With A Partner

Start with the same steps as any buyer, but together. Agree on ownership percentages, who runs the business and how you will fund the Down Payment. Then get a pre-qualification letter that shows sellers and brokers the partnership can close. Review the SBA Down Payment rules and the SBA business acquisition loan page so both partners understand the structure before you make an offer.