Exiting a business is one of the most significant decisions a business owner will make. Whether you're planning to retire, reduce your role, or shift focus to another venture, finding a strategy that supports both your financial goals and business continuity is key. Fortunately, New Jersey entrepreneurs have a strategic and flexible option: SBA Partial Buyouts—a tool that allows for gradual transition while preserving company stability and ownership structure.

This approach empowers business owners to sell a portion of their interest while still retaining a role in operations, providing a unique alternative to full exits or private equity deals.

Understanding the SBA 7(a) Loan Structure

The Small Business Administration (SBA) offers a variety of loan programs to help small businesses grow, transition ownership, and access capital. One of the most popular and accessible options is the SBA 7(a) loan, designed to fund business acquisitions, working capital, and real estate purchases.

Traditionally, SBA loans have supported full business acquisitions. However, with recent regulatory updates and growing demand for flexible exit strategies, partial buyouts have become increasingly viable—especially for businesses with solid earnings and experienced management successors.

Why Partial Buyouts Make Sense in Today’s Market

In the current economic landscape, many baby boomer business owners are seeking retirement or semi-retirement options without completely walking away. At the same time, key employees or minority partners are often eager to increase their ownership stake. This creates the perfect setting for a partial buyout.

Some compelling reasons why NJ business owners are embracing this model include:

• Retain Business Continuity: The departing owner can train the successor and gradually transfer leadership over time.
• Minimize Risk for Buyers: Buyers don’t have to purchase the full value of the business immediately, lowering the financial barrier to entry.
• Smoother Succession Planning: Current staff or family members already involved in the business can transition into ownership with less disruption.
• Tax Planning Flexibility: Spreading out ownership changes may offer tax benefits for both parties, depending on the structure of the deal.

What Types of Businesses Qualify?

Not every business is a candidate for a partial buyout. Lenders and the SBA typically look for companies with consistent profitability, low debt levels, and strong internal systems. The businesses most likely to benefit from this model often fall into industries such as:

• Professional services (law, accounting, medical, consulting)
• Manufacturing
• Wholesale distribution
• Niche retail or e-commerce
• Franchise operations

In each of these sectors, there’s often an internal candidate—such as a long-term manager or co-owner—ready and willing to step up into a larger leadership or ownership role.

Structuring the Deal: Key Considerations

SBA-backed partial buyouts typically require thoughtful planning and collaboration between buyers, sellers, and lenders. A few elements to consider when structuring the deal:

1. Ownership Transfer Percentages

The SBA requires that the buyer acquire at least a 51% ownership stake to be eligible for a loan under current guidelines. The seller can retain the remaining interest, and eventually sell that portion later.

2. Down Payment and Equity Injection

The buyer typically needs to inject 10% equity into the transaction, which can come from personal funds or qualified retirement assets (such as a Rollover for Business Startups, or ROBS).

3. Seller’s Role Post-Transaction

The seller may continue to work in the business as a consultant or minority partner. However, SBA guidelines prohibit them from holding a controlling interest or undue influence once the transaction is funded.

4. Valuation and Financing Terms

An independent valuation is usually required, and terms are generally based on 10-year amortization with favorable interest rates. The transaction must also meet SBA’s requirement for full use of loan proceeds for eligible business purposes.

The Role of SBA-Approved Lenders and Advisors

Navigating this kind of deal isn’t something business owners should do alone. Working with an SBA-approved lender who understands partial buyouts is critical. They’ll help ensure compliance, structure the loan appropriately, and facilitate underwriting.

In addition to financing, business owners should also consult:

• CPAs or tax professionals for potential tax liabilities or deferrals
• M&A advisors to assist in valuation and negotiations
• Business attorneys to draft buy-sell agreements and ensure regulatory compliance

These professionals provide invaluable support in crafting a transaction that meets everyone’s goals and passes all legal and financial scrutiny.

Real-World Impact in New Jersey

In recent years, more and more New Jersey businesses have successfully used this model to enable growth while respecting the legacy of the original owners. From family-run manufacturers in northern NJ to thriving hospitality groups along the Jersey Shore, this model provides a win-win for all involved.

Buyers gain ownership opportunities without taking on the burden of a massive upfront purchase, and sellers find peace of mind knowing their business will remain in trusted hands.

Conclusion

For entrepreneurs exploring succession planning or gradual exit strategies, SBA Partial Buyouts offer a flexible and financially sound solution. Rather than selling the entire business outright, owners can ease into retirement or a new phase of life while still contributing to the success of the company they’ve built.

As more lenders recognize the value of this model and more NJ business owners seek retirement solutions, partial buyouts will likely continue to grow in popularity. With the right advisors, structure, and planning, it’s one of the smartest paths forward in today’s evolving business landscape.