Using SBA Loans For A Liquidity Event—And How To Become Eligible

Matthew R. Meehan is a leading finance expert and CEO of Shield Advisory Group. He specializes in helping SMEs access credit and capital.

For many business owners, a liquidity event, whether it’s selling a piece of the company, buying out a partner or exiting entirely, feels like a distant milestone. It’s a “tomorrow” issue, something to worry about later. The thing is, “later” tends to arrive faster than expected.

Here’s the truth: The time to start preparing isn’t when you need to transition—it’s now.

And with updated SBA 7(a) loan rules going into effect June 1, 2025, it’s more important than ever to understand how these loans work and what it takes to qualify under the new standards.

Let’s break down how business owners can use SBA loans as a tool for taking equity off the table without giving up control, bringing in or buying out a partner, executing a full or partial exit, and qualifying under the latest SBA rules.

SBA 7(a) Loans: Not Just For Startups

While SBA 7(a) loans are often associated with acquisitions or working capital, they’re a powerful tool for succession, exit planning or ownership changes.

And thanks to the latest rule changes effective June 1, 2025, the U.S. Small Business Administration has provided both greater clarity and stricter standards for transactions involving ownership changes, including:

• Partial buy-ins must direct stock purchases (no rollover equity or new entities).
• 10% minimum equity injection required for full ownership changes. Seller notes may count if:
  • On full standby for the life of the loan
  • Not more than 50% of the equity injection
• Sellers keeping less than 20% equity must guarantee the loan for two years.
• All owners must be U.S. citizens or green card holders.
• For partial buy-ins, debt-to-worth must be no more than 9-to-1.

Bottom line: These loans are still powerful but require cleaner structures, better-prepared businesses and more upfront planning than ever.

Option 1: Take Chips Off The Table Without Walking Away

You’ve built something valuable. But instead of waiting to sell 100% of the business in one transaction, many owners are now choosing to sell a minority stake today. Why? Because it frees liquidity and allows them to diversify, de-risk or reinvest, all while continuing to operate and grow the business.

This “two-step exit,” or the Double Dip Strategy, works like this:

1. Sell a minority share (10% to 49%) using SBA financing.
2. Use those funds to grow or build personal wealth.
3. And finally, exit fully at a higher valuation in the future.

Per SBA rules, these partial sales must be stock purchases, not asset sales or rollups. This limits flexibility but offers a clear path for those prepared to follow the guidelines.

Option 2: Bring In Or Buy Out A Partner

Buying out a partner? Bringing on someone new? The SBA loan can help finance the transition if you meet the right criteria. This includes:

• 10% equity injection minimum (cash or 50/50 split with seller note).
• Seller financing must be fully deferred for the loan’s life.
• Partial buyouts must be structured as stock deals.
• If the seller keeps under 20% equity, they must personally guarantee the loan for two years.
• All parties must be co-borrowers, regardless of ownership percentage.

While these updates bring clarity, they also require thoughtful planning and a clean deal structure. If you’re not prepared, these changes can slow you down or derail a potential transition.

Option 3: Full Or Partial Exit

Hit the point where you’re ready to exit entirely? The SBA 7(a) loan is still one of the best tools available for your buyer. But that also makes it an important tool for you as the seller.

When a buyer uses SBA financing:

• You get paid up to 90% of the business’s value at closing.
• The remaining 10% can be seller-financed (if held on full standby).
• You can receive full fair-market value, not a discounted price, due to a lack of capital.
• You open the door to more buyers, particularly individual entrepreneurs and first-time acquirers.

But your business still has to be SBA-eligible for this financing to work, which means your books, structure and operations all need to be dialed in.

What You Need To Do Now To Be SBA-Eligible

Even if you’re not taking the loan, your business must be SBA-eligible for a buyer to secure financing. Here’s what that means in practical terms:

1. Clean, Consistent Financials

Messy books are the No. 1 deal killer. Make sure you have:

• 2 to 3 years of tax returns
• Up-to-date P&Ls and balance sheets
• Logical, verifiable add-backs

2. Profitability

You must show that the business has sufficient cash flow to support loan repayment. Target a 1.15x+ debt service coverage ratio (DSCR).

3. Separation Of Business And Personal Expenses

No co-mingling; no personal meals on the company card; no paying your cousin to “consult.” Clean it up ASAP.

4. Strong Business Credit

Buyers and lenders will review your business credit profile—and yes, they can do it without your permission. Weak or nonexistent credit is a red flag.

5. Reasonable Existing Debt

Got stacked high-interest loans or merchant cash advances? These are red flags. Refinance or clean up your debt structure to improve your eligibility and valuation.

Why This Matters Now, Not Later

Every business owner eventually faces a transition: retirement, burnout, partnership changes or unexpected life events. The question is: Will you be prepared when it happens?

Under the rules that take effect June 1, 2025, by preparing now, you can attract higher-quality buyers or partners, access liquidity without selling everything, and exit on your timeline, not under pressure.

Strategic liquidity is a power move.

The SBA 7(a) program is still one of the most flexible and accessible financing tools for small-business owners looking to exit, restructure or scale. But the rules have changed.

Whether you want to take some chips off the table, bring in a new partner or sell your business outright, SBA financing can help if your business is structured and positioned correctly.

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