What Happens After the Sale? SBA Loan Requirements Sellers Should Know
- Mark Hartmann
- 12 minutes ago
- 7 min read
You sold the business. Champagne popped. Hands were shaken. The deal is closed, and you're officially out. Right?
Well, almost.
If your business was purchased using an SBA 7(a) loan, the story doesn’t entirely end at closing. What happens after the ink dries is just as important—especially if you’re the seller. Why? Because SBA-backed deals come with a unique set of post-closing requirements designed to protect the buyer, the lender, and ultimately, the government agency that guaranteed the agreement.
Ignore them, and things can get messy. Understand them, and you’ll glide into retirement with confidence—and a bit more money in your pocket.
This article explains what sellers need to know about SBA loan requirements after a sale.
Why Does the SBA Care What Happens After Closing?
Let’s get something straight: the SBA doesn’t loan money directly. Banks do. But when the SBA guarantees 75% to 85% of that loan, they suddenly have skin in the game and want to minimize their risk.
That means every SBA-backed business acquisition has to meet some particular post-closing rules, especially when it comes to:
- Seller involvement during the transition
- Consulting agreements
- Seller notes
- Lease and license transfers
- Non-competes
- And yes, even the way you say goodbye
The SBA's goal is to ensure that the buyer gets a fighting chance and the business doesn't implode the day after the seller walks away.
The Transition Period: How Long Can You Stick Around?
Most SBA deals include a seller transition period ranging from 30 to 90 days. That’s your window to introduce the new owner to your team, vendors, clients, and key systems—and teach them how to keep the wheels turning.
But the SBA doesn’t want you hanging around indefinitely. They have strict guidelines:
- You must give up ownership. Period. No more equity, no more control.
- You cannot hold a management role. You can consult, advise, and train but can’t call the shots.
- Consulting agreements must be documented. If you're staying on in any capacity, it has to be clearly outlined in the purchase agreement or a separate consulting agreement. And that agreement must be limited in scope and duration (typically under 12 months).
If you’re thinking, “I’ll just stick around in the background and help out when needed,” be careful. That’s the grey area that can trip red flags during an SBA audit.
SBA Seller Notes: The Devil’s in the Details
Seller financing is common in SBA deals, but the structure matters if you're offering a seller note.
There are two main paths here:
1. Seller Note as Part of the Buyer’s Equity Injection
If your note is being used to help the buyer meet the SBA’s required 10% equity injection, then the SBA says:- The note must be on full standby for 24 months.- That means no payments of principal or interest for two years.- You’ll also need a signed standby agreement to be included in the loan file.
2. Seller Note Not Used for Equity
If your note isn’t helping the buyer meet the equity requirement:- Payments can begin immediately.However, the lender and SBA must still clearly disclose and approve the repayment terms.
Important: Seller notes are always subordinate to the bank loan. So if things go south, you’re last in line for repayment. Know the risks—and price your deal accordingly.
Earnouts? Forget About It.
Let’s clarify this: earnouts are not allowed in SBA 7(a) transactions.
An earnout is a deal structure where a portion of the sale price is contingent on future performance. While it might sound appealing—especially for businesses with growth potential—the SBA says no. Why? Because they require the total purchase price to be:
- Fixed
- Defined
- Paid (or payable) at closing
No, “Maybe I’ll get paid later if things go well.” If the buyer is using SBA financing, all considerations have to be set in stone at closing.
Alternatives? You can use a seller note or negotiate a higher fixed price backed by a solid appraisal or valuation.
The Non-Compete Clause: You're Not Coming Back
The lender will require the seller to sign a non-compete agreement in virtually every SBA deal. Typical terms are:
- 2 to 5 years
- A defined geographic radius
- Restrictions on starting, joining, or consulting for a competing business
And yes, this includes that little “side project” you were considering launching next year. The non-compete is non-negotiable. Why? Because the SBA wants to protect the buyer’s investment, your buyer doesn’t want you taking your contacts and starting a rival shop down the street.
So, if you’re itching to start something new after the sale, just make sure it’s not in the same sandbox.
Lease Transfers and Real Estate Considerations
Whether you're selling a business with leased premises or including real estate in the deal, post-closing logistics can get tricky.
For Leases:
- The lease must be assigned or rewritten to meet SBA lending standards.- SBA typically requires the buyer to have at least 10 years of lease term (including options).- The lease must be transferable, and any landlord consent must be secured before closing or documented as a post-closing condition.
For Real Estate:
- Title work, appraisals, and environmental reviews may continue post-closing.- These must meet SBA guidelines and often involve follow-up documentation.
The bottom line is that even after the sale, there may be items on your to-do list related to the physical location of the business. Don’t vanish until they’re wrapped up.
Licensing, Permits, and Regulatory Transfers
In certain industries—like construction, healthcare, food service, or anything regulated—transferring licenses and permits can be challenging.
Here’s what the SBA and the lender want to see:
- Confirmation that all necessary licenses and permits have been transferred to the buyer.
- Documentation demonstrating regulatory compliance.
- If your assistance is required (e.g., if you’re still the license holder), this must be detailed in the consulting agreement.
Pro tip: Don’t assume the buyer has it covered. Make a list of all permits and licenses required to operate, and confirm with the buyer (and your attorney) that the transition plan is bulletproof.
Post-Closing Reviews and Audits
Here’s the fun part: just because the deal is done doesn’t mean it won’t be reviewed later.
SBA lenders are required to maintain comprehensive post-closing documentation; in some cases, the SBA will conduct a full audit.
That means they may:
- Review your consulting agreement
- Confirm that you have fully exited ownership
- Validate the loan structure and its payments
- Ask for your perspective if something seems off
If you’re contacted, don’t panic. But make sure you can speak to your role (or lack thereof) post-sale and that all documents align with what was reported to the lender.
Transition Best Practices: How to Exit Gracefully
Want to be remembered as the seller who made things easy, not the one who caused buyers to second-guess everything? Follow these best practices:
- Create a transition checklist that includes everything from systems training to vendor introductions.
- Communicate with staff to ensure employees understand who’s in charge, what’s changing, and what’s staying the same.
- Don’t hover; be available, not omnipresent.
- Let go of control. You sold the business, so allow the new owner to take charge, even if you don’t love their decisions.
- Support, don’t steer. The goal is to empower, not micromanage.
If you’ve negotiated a consulting agreement, be clear about your scope—and respect the boundaries.
What Happens If the Buyer Defaults?
It’s rare, but it happens. If the buyer defaults on their SBA loan:
- The lender will step in to collect and may liquidate the business.
- The SBA will cover the guaranteed portion of the loan.
- The buyer remains personally liable for the unpaid balance.
- Your seller note? It’s subordinate and at risk.
That’s why structuring the deal carefully—especially around seller financing—is important. Know your downside, get the proper protections in place, and don’t overextend.
Final Thoughts: Post-Sale Planning Matters
If you’re selling your business with SBA financing, don’t think closing day is the finish line. There’s a whole post-sale phase where the SBA, the lender, and your buyer still need things from you.
Here’s the good news: with proper planning, you can:
- Maximize your payout
- Minimize post-sale headaches
- And exit with your legacy (and sanity) intact
Selling your business is a big deal. Selling it right—especially with SBA financing—is even bigger.
Thinking About Selling Your Business with SBA Financing?
At HartmannRhodes,
✅ We understand the entire lifecycle of an SBA sale.
✅ We protect your interests—during and after the deal.
✅ We ensure you exit confidently (and cash in hand).
You spent decades building your business. Now, let’s help you sell it—the right way.
Mark Hartmann is a former business owner turned M&A advisor who knows firsthand what it takes to build, grow, and sell a successful company. A three-time Inc. 5000 CEO, Mark did just that before navigating its eight-figure sale—giving him a rare perspective that sets him apart from most brokers. Today, he helps owners of companies valued between $1M and $25M plan and execute smooth, profitable exits.
Mark understands that selling a business isn’t just a financial decision—it’s personal. That’s why he works closely with owners to protect their legacy, maximize value, and make the transition on their terms. He holds an MBA from Eastern University, a Master’s Degree in Organizational Change Management from St. Elizabeth University, and a Graduate Certificate in Executive Coaching from Columbia University. Some of his professional credentials include Certified Mergers & Acquisitions Professional (CM&AP), Certified Business Intermediary (CBI), Certified Exit Planning Advisor (CEPA), and Certified Value Builder (CVB).
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Partner with HartmannRhodes, expert business brokers and M&A advisors, to strategically navigate your business sale—maximizing value and ensuring a smooth transition. Reach out for tailored business sale strategies. Contact us today!
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