Evaluating Transition Risk w/ a 3-Person Partnership

March 24, 2026

by a searcher from Southern Illinois University at Edwardsville in Troy, IL, USA

I'm evaluating a niche consulting firm. I am highly experienced in the space, so business-buyer fit is strong. There are 3 current owners who have jointly run the firm for 20 years. Two of them wish to stay on post close. One for ~2 years, and one indefinitely. A few questions: 1. How does SBA view a minority owner staying on post close? I know typically they do not want an owner around beyond 1 year, but not sure if that applies here. 2. How would you diligence the transition risk in this scenario? I am primarily concerned with the question of how willing are they to actually give up control to a new owner after running the show for 20 years? 3. Any thoughts on deal structure? I am already thinking an equity carry is obvious and am curious to hear from others with more experience.

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Reply by a lender
from Eastern Illinois University in 900 E Diehl Rd, Naperville, IL 60563, USA

Tim, I can assist on the lending question. I would also be happy to get on a call to talk through options related to this as well as it can get a bit complex, but I will try to give you as much information as I can here. With the updated SBA rules from last year you can do a partial business acquisition. Under a partial business acquisition you would purchase a portion of the existing stock or membership interest in the business. If there are existing minority owners or own 20% or less of the business and they do not sell any of their shares, the SBA allows them to stay in the business indefinitely and retain their ownership. However, if you pay them for some of their shares, how it is handled by the SBA is different depending on their remaining equity interest. If they own 20% or more of the business post-closing, whether you paid them for part of their shares or not, they are required to sign a full personal guarantee on the loan by the SBA and also have the potential collateral issues that come up with that full guarantee that a new buyer would. If they did not sell some shares and their ownership post-closing will be under 20%, then they would be require to sign a full personal guarantee on the loan amount limited to two years, and that guarantee would automatically expire at the end of two years so long as the loan has been kept current for 12-months leading up to the two-year anniversary and is in good-standing with the Bank. As you can tell, there are nuances here, so if easier to jump on a call to discuss your specific situation, I would be happy to do so. You can reach me here or directly at redacted

Reply by a professional-advisory
from American University, Washington, D.C. in Lewiston, ME, USA

@redacted‌ is who you want to reach out to for this

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