Partial buy-out deal questions

February 16, 2026

by a searcher from Carnegie Mellon University in Denver, CO, USA

I am looking at a deal where the seller wants a partner and maintain a minority stake in the business. I want to propose a 81% partial buy-out but he may push it down to 51% since he sees potential with new contracts he just won. I am aware that if the seller owns less than 20%, he needs to sign a personal guarantee for 2 years. Greater than 20%, he must guarantee the loan for the duration of its life. 1. How is the debt paid? From my research, the business takes the SBA debt I borrow to purchase the majority stake. Does the business pay the debt from its profits and the remainder is distributed to the owners (me and the seller) based on % of shares? I am concerned that the seller may think that he's funding my debt. 2. This must be a stock purchase per SBA - so how are working capital and liabilities resolved? Do I still ask for cash free, debt free, with full working capital even when I don't fully own the business? Do I need to inject more capital into the business that I wouldn't typically account for in a full acquisition?

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

I concur with Hal's comments. The business would be on the hook for the loan and technically the debt service comes before any distributions or anything else. Typically speaking lenders would require all other debts to be repaid at closing. However, if there is an EIDL that could be supported to a new lender and if there is specific equipment debt, that might be able to stay in place. It really depends on the lender preference. As for working capital, lenders would want there to be a post-closing balance sheet that shows sufficient working capital to support operations going forward. You can also build additional working capital into the loan as well. If you have more specific questions or would like to get a free review of the deal to look at options, we would be happy to assist you. You can reach me here or directly at redacted

Reply by a professional
from University of Michigan in Detroit, MI, USA

1. Yes, the business will pay the loan, which will be a pre-distribution expense. The seller could make that argument. But the reality is he's insisting on the deal structure. There are also ways around the issue if necessary, which I am happy to discuss. 2. Your lender will insist that all debts are paid off prior to the closing. And you should negotiate working capital like any other deal. Importantly, in your situation, the seller's got a strong reason for making sure that there is sufficient working capital in the business at close. Without it, the business may fail making his remaining interest worthless. Happy to discuss further. Feel free to reach out at redacted and we can set up a time to discuss.

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