With TowneBank SBA Lending, partner buyout financing uses an SBA 7(a) loan to fund the purchase of a departing owner’s interest, with up to about 90% of Total Project Cost financed and sometimes more. This helps reduce the need to draw heavily on personal cash or company reserves to weather the transition.
The remaining owner or owners continue operating the business, with an independent business valuation supporting the purchase price. We recommend working with your attorney early on the buy-sell agreement and purchase documents to ensure a smooth process.
It’s important to note that partner buyout loans facilitate buying out an existing co-owner. Purchasing a business from a third party entails different considerations, and we recommend visiting the SBA loan for buying a business page.
Our SBA lending team can help structure financing to support your business’s transition.
Have questions about SBA financing? Tell us about your project, and a member of our SBA Lending team will help you explore potential financing options and next steps.
A partner's exit and change of ownership can take several forms. We approach each one calmly and practically, with financing structured around the business and the ownership transition.
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The Estate
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Unexpected Ownership TransitionA partner has passed away or can no longer serve, and the surviving owner needs to purchase the interest from an estate or family.
With a defined timeline and clear documentation, financing can help facilitate the ownership transition.
This is financeable. -
A Partner's Exit
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A Partnership Has Reached a Turning PointTwo owners want different things, and a structured buyout is often the cleanest path forward.
Attorneys handle the terms, while financing supports the ownership transition.
This is financeable. -
The Retiring Partner
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A Founder Is Ready to Step BackA founder is ready to step back and withdraw their capital, while the remaining owner wants continuity rather than an outside buyer.
The business is healthy, and the transition of ownership can be structured cleanly.
This is financeable.
Business partner buyout financing may fit when:
The SBA loan requirements to finance a partner buyout require you to gather the buy-sell (buyout agreement) and/or business partnership agreement, three years of business financials, and three years of personal tax returns for owners holding 20% or more.
Partner buyout loan approval is cash-flow based: the question is whether the business can service the debt after the buyout, not whether the business owners have the purchase price in a bank account or collateral.
An SBA 7(a) loan funds the departing business owner’s interest, with up to about 90% of Total Project Cost financed (and sometimes more), using 10- to 25-year fully amortizing terms with no covenants. If the departing partner is willing, a seller note (financing the seller leaves in place) can sit alongside the SBA loan.
Structure the transition with less reliance on personal liquidity or business reserves.
Additional operating capital can be structured alongside the ownership transition.
10- to 25-year fully amortizing terms with no covenants.
Working capital can be structured as a companion to the same loan, helping keep the business adequately funded after closing. As partners’ ownership reaches 20% or more, the Small Business Administration’s all-available collateral rule applies to personal assets when business collateral is insufficient.
As an SBA Preferred Lender, we are authorized to approve 7(a) loans in-house for a faster-than-expected loan process.
If the departing partner also owns the building, a 504 can combine on the same deal, but the 504 must follow a double-underwriting and external approval process. Our SBA 7(a) lenders are here to answer your questions about the proper structure for your deal.
Our SBA financing process moves from initial review through closing and servicing, with each step designed to help ownership transition smoothly while the business continues operating.
- Three years of personal tax returns
- A Personal Financial Statement
- Proof of equity sources from every owner holding 20% or more
Our underwriter will order the business valuation.
At closing, a dedicated closer coordinates the buyer, departing partner, and both attorneys. Delivering the buy-sell agreement and financials to us early helps keep things moving.
Throughout this process, we operate with urgency and discretion. Your partnership buyout conversation starts with one specialist and stays with them.
The business continues operating throughout the transaction while financing helps facilitate the ownership transition.
Two owners share ownership of a successful operating business.
SBA financing is used to purchase the departing owner's interest and facilitate the transition.
The remaining owner continues operating the business and repays the partner buyout loan through business cash flow.
Partner buyout financing is designed for ownership transitions involving established operating businesses. Before moving forward, it's helpful to understand the key requirements that help determine whether an SBA-backed solution may fit your situation.
SBA financing is generally intended for operating businesses, not investment entities. The company should be a for-profit business operating in the United States and meet SBA size requirements.
A partner retirement, separation, estate transition, or ownership restructuring should be documented and supported by legal agreements outlining the proposed ownership change.
The primary underwriting question is whether the business can comfortably support the debt after the transition. Historic performance and projected cash flow both play an important role.
Owners should be prepared to provide personal financial information, tax returns, and documentation supporting the ownership transition and any required equity contribution.
Every ownership transition is different. The most effective way to determine whether your buyout qualifies is through our pre-screen process. We'll review the ownership change, evaluate the business fundamentals, and help you understand whether SBA partner buyout financing may be an appropriate solution before you invest significant time in the process.
When you're researching how to buy out a business partner, remember that we work with co-founders taking full ownership, professionals buying out a retiring partner in a practice, and family members purchasing an interest from an estate.
Plus, when working capital needs to accompany a buyout deal, an SBA Express loan may be available as a companion facility alongside the 7(a).
- Co-founders assuming full ownership
- Professionals buying out a retiring partner
- Family members purchasing an ownership interest from an estate
Attorneys draft the buy-sell agreement. CPAs help value and structure the transaction. Since our division focuses solely on SBA lending, we pose no cross-sell threat to these relationships.
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Have a confidential conversation with a TowneBank SBA lender before anything is submitted. We can discuss the ownership transition, review the details of the opportunity, and help you understand whether partner buyout financing may be a fit.
Get started with a conversation. One specialist will guide you through the process, answer your questions, and help evaluate the path forward.
Partner Buyout Loan Questions
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We order an independent business valuation during underwriting to establish a defensible price and help protect both sides in a sensitive ownership transition.
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It depends on the deal and loan amount. Up to about 90% of Total Project Cost could be financed (and sometimes more) depending on the transaction and applicable U.S. Small Business Administration requirements.
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That depends on your agreements and circumstances. Review the buy-sell agreement with your attorney before determining whether a buyout can proceed.
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A seller note lets the departing partner finance part of the purchase price. Whether and how it fits your structure depends on SBA requirements and the transaction.
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The business continues operating throughout the financing process. We structure the ownership transition and financing solution without interrupting normal business operations.
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SBA 504 financing can combine with an SBA 7(a) loan on one deal when the departing business owner’s interest includes the owner-occupied building.
Some applications may require further consideration, and additional information may be required.
Credit terms are subject to approval.
Amount of Credit is subject to SBA program.