SBA SOP 50 10 8.1, App15.A.1 — Types of Changes of Ownership
Verbatim text of SBA SOP 50 10 8.1 (with Technical Policy Updates) section App15.A.1 (Types of Changes of Ownership). Effective 2026-10-01 for applications received by SBA on or after that date; SOP 50 10 8 governs applications submitted through 2026-09-30. 5 provision(s) quoted from SBA's .docx.
See also
SBA lending corpus: SOP 50 10 and the active notices, with the expiry watcher.
Verbatim regulatory text
Verbatim provisions from SBA SOP 50 10 8.1, App15.A.1 — Types of Changes of Ownership — each quote is a verified substring of the regulator-published source snapshot, not retyped. Quoted for reference; this is not legal advice. The operational layer (P&P updates, prompts) lives in the regulation update kits.
SOP 50 10 8.1 App15.A.1
1. Types of Changes of Ownership Change of ownership transactions fall into four categories: Initial Acquisition, Business Expansion, Owner Buyout (Existing and Partial Change), and ESOP and Cooperative. Note: Initial Acquisition is the default category for 7(a) changes of ownership. For a change of ownership transaction to qualify as a Business Expansion, Owner Buyout, or ESOP & Cooperative, the Lender must document how the Applicant satisfies the requirement in their credit memorandum. The Lender is required to input the change of ownership type into the SBA Loan System. The following requirements apply to each transaction based on the type of change of ownership being financed:
SOP 50 10 8.1 App15.A.1.a
a. Initial Acquisition: A change of ownership transaction that results in a new majority or largest individual owner who was not previously a direct or indirect owner, or an individual who has been employed for fewer than 24 months by the business being acquired. Initial Acquisitions may be financed under the following circumstances: i. A small business that is not an existing owner and is not operating another business in the same NAICS Industry Group (four-digit) is purchasing 100% of the ownership interest in the small business. The acquiring entity will be the Borrower. If, however, the business being acquired will continue to exist as a separate entity, the acquiring entity and the small business being acquired must be Co-Borrowers. ii. A Person who is not an existing owner is purchasing 100% of the ownership interest in the small business. The small business and the Person who is acquiring the ownership interest must be Co-Borrowers. In addition, the Note must be executed, jointly and severally, by both the Person who acquires the ownership interest(s) and the small business whose ownership interest is being acquired. iii. A small business is acquiring another small business through an asset purchase. The acquiring entity will be the Borrower. If, however, the business being acquired will continue to exist as a separate entity, the acquiring entity and the small business being acquired must be Co-Borrowers.
SOP 50 10 8.1 App15.A.1.b
b. Business Expansion: A change of ownership transaction in which an existing operating business purchases another. Business Expansion transactions may be financed provided the following conditions are met: i. An existing small business that has been operating for at least two full fiscal years with the current ownership purchasing 100% of the ownership interest in another business. ii. The acquired business is in the same NAICS Industry Group (four-digit) as the Applicant. A Business Expansion transaction must result in the same or a greater number of full personal guarantors as would have been required for the ownership structure of the acquiring business in place prior to the transaction. Allowing for additional personal guarantors provides the Applicant with the flexibility to establish a separate ownership structure for the acquired company. iii. The Applicant operating business is required to be the Borrower. If, however, the business being acquired will operate as a separate entity, the Applicant entity and the small business being acquired must be Co-Borrowers.
SOP 50 10 8.1 App15.A.1.c
3 sections · 6,528 characters of verbatim text. Open a section to read it, or . Every section below is in the page source whether open or closed.
§c. Owner Buyout: A change of ownership transaction that modifies…1,304 ch
c. Owner Buyout: A change of ownership transaction that modifies the ownership structure of the Applicant business and does not involve the acquisition of another entity or asset. At least one member of original ownership must remain in place following the transaction and guarantee the loan, regardless of the percentage of ownership post-sale, unless otherwise outlined below. For all Owner Buyout transactions, individuals not currently employed by the business for a minimum of 24 months may only acquire less than 50% of the total equity and may not become the largest direct or indirect shareholder. For purposes of this limitation, indirect ownership interests held through any entity (including holding companies, trusts, or limited partnerships) must be aggregated with any direct ownership interest held by the same individual. Transactions that do not meet this requirement must be processed following the requirements in Para. C. Credit Standards in Appendix 15 for Initial Acquisition (specifically the minimum DSC, minimum equity injection and Quality of Earnings requirements). While the Credit Standards of Initial Acquisition apply, sellers retain their ability to remain as an owner and employee of the business as allowed under an Owner Buyout. Owner Buyouts fall into two categories:
iExisting Owner Buyout: A change of ownership between existing…1,588 ch
i. Existing Owner Buyout: A change of ownership between existing owners, or current employees, may be financed under the following circumstances: a) One or more current owners, current employees or combination of both, are purchasing the entire interest of another current owner(s), resulting in 100% ownership of the business by the remaining owner(s). To qualify for this category, the owner(s) or employee(s) must have been actively participating in the business operations for at least the last 24 consecutive months. The small business and the owner(s) who is acquiring the ownership interest must be Co-Borrowers. In addition, the Note must be executed, jointly and severally, by both the Person(s) who acquire(s) the ownership interest(s) and the small business whose ownership interest is being acquired; b) The small business is redeeming the ownership interest of an owner(s), resulting in 100% ownership of the small business by the remaining owner(s). The small business must be the Borrower, and the remaining owner(s) are subject to the requirements for guaranties in Section A, Ch. 5, Para. A, Guaranties; or c) A single owner is selling their 100% ownership interest to an individual who has been employed for at least 24 months preceding the application. The individual must be employed by the Applicant business for a minimum of 24 months, otherwise the transaction must be processed under the requirements in Para. C. Credit Standards in this Appendix for an Initial Acquisition. The small business and the Person acquiring the ownership interest must be Co-Borrowers.
iiPartial Change of Owner: Loan proceeds may be used to fund the…3,636 ch
ii. Partial Change of Owner: Loan proceeds may be used to fund…1,249 ch
ii. Partial Change of Owner: Loan proceeds may be used to fund the purchase of all or a portion of one or more owner’s interest in the business or of the business itself (e.g., the purchase of treasury stock or membership units) and where at least one of the original owners remains as an owner after the sale and personally guarantees the loan. a) For Partial changes of ownership: Both the Operating Company and any new direct and/or indirect owner (including individuals and entities) who are acquiring any direct and/or indirect ownership interest in the Operating Company must be Co-Borrowers on the new loan, regardless of the percentage of ownership being acquired. Indirect owners must also personally guarantee the loan. This provision applies only to new owners who did not have equity in the business until the partial change of ownership. For example, a Person who will be a new owner and who is gaining 1% direct and/or indirect ownership in the Operating Company must be a Co-Borrower. As a reminder, because Standard 7(a) processing requirements apply to all change of ownership transactions, in the case of a collateral shortfall (not “fully secured”), SBA requires Lenders to adhere to collateral shortfall rules (see Appendix 19: 7
aCollateral Requirements paragraph B, subparagraph 1.c.i for all…954 ch
(a) Collateral Requirements paragraph B, subparagraph 1.c.i for all Borrowers and Co-Borrowers. b) All remaining owners are subject to the requirements for guaranties in Section A, Ch. 5, Para. A, Guaranties. i) All individuals gaining equity through the transaction, including transactions involving holding companies, are required to be Co-Borrowers. This provision applies only to new owners who did not have ownership in the business prior to this transaction. ii) Any selling owner (one who receives loan proceeds in exchange for selling part of their ownership) who remains as a direct or indirect owner and owns less than 20% of the business post-sale must provide a full guaranty for the full loan amount pursuant to 13 CFR 120.160(a). (a) The term of the guaranty must be for at least two years after final loan disbursement. The guarantor may be released only if the loan has been current for the consecutive 12 months period prior to release.
bLender may use SBA Form 148L or Lender’s equivalent. On SBA Form…137 ch
(b) Lender may use SBA Form 148L or Lender’s equivalent. On SBA Form 148L, the term “default” references default as defined in the Note.
cSBA does not require these guarantors that are providing a 2-year…1,296 ch
(c) SBA does not require these guarantors that are providing a 2-year guaranty to pledge their personal assets (i.e. Personal residences) in the event of a collateral shortfall. iii) For ESOP transactions, there is a statutory requirement that if the seller of the employer small business remains as a partial owner, the seller must provide a full, unlimited guarantee regardless of ownership – the statutory requirement at 15 U.S.C. § 636(a)(15)(B)(iv)(II) cannot be waived. c) Multi-step partial changes of ownership are not eligible. A multi-step partial change of ownership occurs when the change of ownership is structured such that some or all of the existing owners are bringing on a new owner(s) via the formation of a new entity that will become the 100% owner of the Operating Company, and where some or all of the existing owners and the new owner(s) will be the owners of the new entity. d) 7(a) loans may not fund a partial change of ownership in an EPC for a business structured as an EPC/OC due to the regulation at 13 CFR § 120.111. However, 7(a) loans may be used to fund a partial change of ownership in the Operating Company of a business structured as an EPC/OC. e) The seller may stay on as an owner, officer, director, stockholder, Key Employee, or employee of the business.
SOP 50 10 8.1 App15.A.1.d
d. ESOP & Cooperatives: A change of ownership involving Employee Stock Ownership Plans or Cooperatives may be financed under the following circumstances when following their applicable requirements: i. An Employee Stock Ownership Plan (ESOP) or equivalent trust is purchasing a controlling interest (51% or more) in the employer small business. (Note: any transaction costs associated with the purchase of the controlling interest by the ESOP or equivalent trust, but not the costs associated with setting up the trust, may be included in the use of proceeds.) (13 CFR § 120.352(b)) See Section A, Ch. 2, Para. B., Loans to Employee Stock Ownership Plans (ESOPS), for more information. a) A small business is obtaining a loan for the sole purpose of re-lending the funds to an ESOP or equivalent trust to acquire a controlling interest (51% or more) in the small business. (Note: any transaction costs associated with making the loan to the ESOP or equivalent trust, but not the costs associated with setting up the trust, may be included in the use of proceeds.) See Section A, Ch. 2, Para. B., Loans to Employee Stock Ownership Plans (ESOPS), for more information. b) When an SBA loan is used to purchase a business owned by an ESOP for a change of ownership where the ESOP is being dissolved, the employees (owners of the ESOP), except for illegal aliens, may remain as employees of the business despite other provisions in this SOP to the contrary. ii. A cooperative is purchasing a controlling interest (51% or more) in the employer small business. (Note: any transaction costs associated with the purchase of the controlling interest, but not costs associated with setting up the cooperative, may be included in the use of proceeds.) These loans may be processed under PLP authority.
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Source of record: https://claudeforcompliance.com/regs/sba-sop81-app15-a-1/
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