Is it possible to bypass the SBA's 1 Year Seller Employment Limit?

November 24, 2025

by a searcher from The University of Michigan - Stephen M. Ross School of Business in Ann Arbor, MI, USA

Hello! I’m evaluating a deal I intend to finance through the SBA 7(a) program. The business has three equal owners. One wants to sell and retire immediately, while the other two want to remain employed for another 2–3 years. Those two owners are not willing to sign a personal guarantee, which makes a partial change of ownership unworkable. However, they are open to a full sale and continuing as employees. (I recognize there are risks associated with having sellers remain in the business for an extended period post-closing.) Has anyone found an effective workaround to the SBA’s one-year seller-employment limitation in a situation like this? I’ve proposed that the one owner who wants to sell now self-finance his portion of the sale until the other two owners are ready to sell, at which point I would buy out all remaining interests. However, if he is not open to seller financing, are there any other ideas? Thank you!

Reply by a lender
from Cornell University in Los Angeles, CA, USA

Hi ^redacted‌ - nice to meet you. Sean Goggins is right; if they stay employed, it will not work with the SBA. However, there is one workaround that does not require the seller to guarantee the loan. The seller can register as a sole proprietor and act purely as a consultant. They would not be a W-2 employee and would have no executive or managerial control, but you can retain them and pay them for advisory support. We have a lot experience financing various types of companies via the SBA. If you ever need help talking through a deal, I am happy to help. We work with all the major SBA lenders. The bank pay us after your loan closes, so this is a 100% free service for you.You can email me directly at redacted or schedule a meeting with me: https://cal.com/francodeguzman/30min. Look forward to chatting!

Reply by an intermediary
from The University of Chicago in Chicago, IL, USA

I hope you find a solution and share. Once, I did solve this puzzle via a family member. In your situation, my understanding is that if all 3 are active and will be out, you will have to show who is going to replace them (unless they are more or less inactive). If you share with the lender the continuity via the consulting route, I think you will be tripping the 12 months rule. Many years back, in CA, SBA discovered a side-agreement few years after the deal closed. Jail time and/or license revocation for many ...lenders, lawyers, buyer, seller, etc.

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