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Glossary

What is Change of Ownership?

Also called: business acquisition, CHOW, partner buyout

In one sentence: The SBA term for a business purchase, including a partner buyout, which carries its own requirements on buyer cash, seller notes and cash-flow coverage.

Last updated · Precise SBA editorial

In plain English

When the loan will be used to buy a business, or part of one, SBA lenders call it a change of ownership. It is not a single loan type; it is a category of use that brings its own rules.

Why the category matters

  • Buyer cash. A minimum applies: 10% of the total project for a typical purchase, with limits on what can count. See equity injection.
  • Seller financing. How a seller note is treated depends on whether it is on standby.
  • Cash-flow coverage. The SBA minimum for most changes of ownership is 1.25x, higher than the 1.15x general floor. See DSCR.
  • Price support. On larger deals, expect questions about whether the price is supported, and sometimes an independent review. See quality-of-earnings review.
  • Rulebook. SOP 50 10 8.1 is the current SBA rulebook, effective October 1, 2026, and it changed parts of this area. Confirm specifics with a lender.

What is and is not one

SituationUsually a change of ownership?
Buying an existing businessYes
Buying out a partnerOften
Buying an existing franchise locationYes
Starting a new location from scratchNo
Buying only the building the business usesNo (that is real estate financing)

Common mix-ups

  • “Acquisition” is not only a whole-company purchase. A partial change can count; see partner buyouts.
  • The building and the business are separate questions and can be financed separately or together.

What to do with it

Read financing a business acquisition, then model your deal in the calculator.

Common questions

Does a partner buyout count as a change of ownership?

Often, yes. Buying out a partner changes who owns the business, and lenders treat it like an acquisition, with attention to how much of the business changes hands and who stays involved. Ask a lender how your structure is treated.

Is buying a franchise a change of ownership?

Buying an existing franchise location is. Opening a new location from scratch is not. Franchise purchases also have their own eligibility questions.

Why is it underwritten differently?

Because the lender is relying on a track record under one owner and a plan for a new one. Price support, transition, and the buyer’s ability to run the business all matter more.

Related terms

Equity InjectionThe portion of a project paid with the buyer’s own money, in addition to the loan, which lenders require and expect to be documented.Standby Seller NoteSeller financing in which the seller agrees not to be paid for a set period and ranks behind the bank loan, so it does not draw on the buyer’s cash flow.Quality-of-Earnings (QoE) ReviewAn independent analysis of a business’s earnings that tests whether reported profit is real, repeatable and supported by records.

Go deeper

Buying a Business with an SBA Loan: How the Financing Comes TogetherAn acquisition loan is underwritten on the business you're buying, and on you. Here's how the pieces fit, in the order they usually come up.Equity Injection and Seller Notes in an SBA Business PurchaseTwo ideas drive the cash side of most acquisitions: how much of your own money goes in, and how the seller's financing is treated. The details changed with SOP 50 10 8.1, so confirm them before you negotiate.

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General information, not legal, tax or financial advice. Precise SBA is not affiliated with the U.S. Small Business Administration. Rules and lender policies change. Examples use hypothetical numbers. We never charge you. If a loan closes, the lender may pay us a referral fee, disclosed on SBA Form 159 (how we get paid). Back to the glossary.