If you are buying a company with SBA financing, the purchase agreement is only part of what has to come together before closing. The program’s ceiling moved this summer, so more buyers are working on larger transactions. The conditions attached to those loans did not loosen at all.
The Ceiling Moved, But the Conditions Did Not
Effective July 4, 2026, qualified borrowers may combine 7(a) and 504 loans for as much as $10 million, double the prior cumulative limit. A borrower who secures the 7(a) first can access up to $5 million there and up to $5 million through 504, which the agency described as decoupling the two programs. The SBA announced it in a July 2026 news release.
Every condition below scales with the loan, and pairing in a 504 usually puts real property into the deal, which adds its own documents. Buyers get into trouble when they treat the higher ceiling as the hard part and the conditions as paperwork.
The Personal Guarantee Reaches Past the Business
Owners holding 20 percent or more of the buying entity must guarantee the loan personally. The guarantee is unlimited, and when business collateral falls short, lenders commonly look to equity in personal real estate. At $10 million rather than $5 million, that exposure is not a rounding difference.
Structure changes the analysis. In a complete change of ownership, investors under 20 percent are generally not pulled into a guarantee. In a partial buyout, that exemption falls away. And a seller who keeps any stake must now guarantee the buyer’s loan for at least two years, which has ended most rollover equity arrangements.
The Landlord Has to Sign Something
Most acquisitions of an operating business involve leased space, and the lender treats that lease as collateral. Expect a request for an assignment of lease with a landlord’s consent or waiver, and expect the lender to want the lease term, including renewal options, to run as long as the loan.
Financing the primary location through a 504 loan does not remove the issue. Satellite offices, warehouses, and retail sites still sit under leases somebody has to sign off on. Institutional landlords route consent requests through outside counsel, and three to six weeks is common, so ask for the form early.
Life Insurance Becomes a Closing Condition
When the business depends heavily on one person, as it usually does in a single-buyer acquisition, the lender will require a collateral assignment of life insurance tied to the debt. The policy has to be issued and the assignment acknowledged by the carrier before funds move. Larger loans mean larger face amounts, which means fuller medical underwriting and more time. Start early.
Seller Notes and the Full Standby Requirement
Seller financing still has a role, though the rules narrowed it. Under the SBA lender operating procedures, a seller note counted toward the required equity injection must meet several conditions:
- Full standby for the life of the SBA loan, with no principal or interest payments during that period.
- No more than 50 percent of the total required equity injection.
- Documentation on SBA Form 155 or an equivalent standby agreement.
- A minimum 10 percent equity injection applies to a change of ownership, so the note fills part of that figure rather than replacing it.
The Purchase Documents Have to Match the Loan Terms
Loan conditions and deal documents pull apart unless someone reconciles them. A note providing for quarterly interest cannot sit alongside a standby agreement forbidding payments. Closing dates tied to a financing contingency need to reflect landlord and carrier timelines.
Our Chicago, IL business contract lawyer reads the commitment letter against the purchase agreement, the seller note, and the lease documents so the package tells one story at closing.
With a letter of intent signed or a lender commitment in hand, a business contract lawyer in Chicago, IL can help you line up the guarantees, consents, and standby terms before they slow the deal down. Contact Kravets Law Group, and we will walk the closing conditions with you and flag what needs attention first.