Author: Josh Huseman, Vice President, Business Owner Advisory Services
In this article:
- How SBA loans can support internal business succession
- When an employee buyout may be financially viable
- What shared loan guaranties mean during ownership transitions
- When SBA-supported business transitions are (and are not) a good fit
- What sellers gain from a structured, phased exit
Every business owner reaches a point where the same question starts showing up:
“Who’s going to take this thing over when I’m ready to step back?”
You might have a capable employee in mind. Someone who already carries weight, knows the customers and treats the business like their own. But then reality hits: They don’t have the money. And you’re not ready to risk everything on a handshake.
That tension – the right person, but mismatched capital – is where Small Business Administration (SBA) supported transitions can solve a real problem. These programs are federally backed but privately underwritten by participating lenders.
The SBA isn’t a shortcut. It is a formal credit enhancement with defined underwriting standards that can make an internal transition possible when business fundamentals support it. The process requires real steps, additional fees and a stack of paperwork, but it also brings legitimacy into an otherwise wishful thought of “maybe they could buy me out someday.”
Here are two ideas that can help an owner rethink what’s possible.
1. “If We Can’t Share a Temporary Loan Guaranty, Are We Really Ready to Share a Business?”
This might be the most clarifying question in the entire internal‑transition conversation.
The SBA recently made changes to support partial ownership transitions, which was a notable change. However, both the outgoing and incoming owners may sign the loan guaranty – at least for a period of time. And the outgoing owner’s reaction is predictable:
“Why should I stay on the hook when I’m transitioning out?”
It’s a fair question. But here’s what is worth considering.
A temporary shared guaranty is less about financial risk and more about revealing whether you are truly aligned. It also tests whether the incoming owner demonstrates competency, capacity and readiness to take over.
If the idea of shared responsibility with structure, limits and a formal timeline creates stress, hesitation or mistrust, that’s important information. It may mean this employee isn’t the successor you hoped they were, or that the relationship needs maturity before it can hold ownership.
But if your mutual reaction is: “Of course. We already run this place together,” then the guaranty simply confirms what’s already true.
Whatever this moment reveals, the clarity is the win.
2. “You Don’t Need a Buyer with a Checkbook. You Need a Buyer with a Plan.”
Many owners write off internal transitions because employees rarely have the necessary liquidity. But some of the most successful internal transfers are financed, not self‑funded.
And if the right buyer already works for you, what they may lack in cash they often make up for in:
- Operational knowledge
- Cultural alignment
- Customer trust
- Long‑term vision for the business
SBA programs can help lenders extend credit for these transitions when the business fundamentals justify it: stable and repeatable cash flow, strong historical performance and demonstrated ability to repay. And none of this is about lowering the bar. It’s about recognizing that immediate liquidity is not the only marker of ownership potential.
Spotting the Employee Who Might Be the One
Look for indicators that echo what strong successors consistently demonstrate in business:
- They think beyond their job
- They make decisions that reflect owner‑level thinking
- They have the humility to learn what they don’t know
- They show financial maturity and accountability
And in licensed industries; contracting, skilled trades, engineering; they need a clear, realistic plan to assume required professional or regulatory licenses. This isn’t a problem; it’s part of the roadmap.
When SBA‑Supported Transitions Are Likely a Good Fit
SBA‑supported internal transitions may be worth exploring when:
- The business is profitable with stable, predictable cash flow
- The purchase price fits within SBA loan size ranges
- You are open to a structured, phased exit rather than an immediate departure
- Your key employee shows capability and commitment — not just ambition
For those new to SBA programs, the 7(a) is commonly used for business acquisitions, and the 504 supports asset‑heavy structures. There are loan fees that vary based on loan size, plenty of documentation, underwriting and coordination. But on the other side is formal, government‑regulated way to make responsible transitions possible when the fundamentals are in place.
This Is Probably Not for You If…
- You want to exit immediately
- You don’t trust your would‑be successor (or they don’t trust themselves)
- You aren’t willing to remain involved for a defined period
- Your successor is unwilling or unprepared to take on licensing or leadership responsibility
Knowing the limits of an option is just as valuable as knowing the potential of one.
What the Seller Actually Gets Out of This
Even if you remain a temporary guarantor, many owners appreciate that they:
- Receive meaningful liquidity up front
- Retain control while the successor builds footing
- Protect culture, jobs and continuity
- Have time to mentor the next owner
- Reduce the risk of a rushed or forced sale
This structured path often preserves enterprise value more effectively than rushed or reactive exit attempts.
The BOAS Mindset: Clarity Over Outcome
At FNBO’s Business Owner Advisory Services, we don’t measure success by whether a client chooses an internal sale, a third‑party buyer, a family transition or something else entirely. Our work centers on helping owners make clear, confident decisions, supported by the best information, grounded thinking and multidisciplinary guidance.
If we can help you explore SBA‑supported internal transitions or any other outcomes, we would love to hear from you. You can also learn more from our Small Business Senior Advisors.
About the Author
Josh is the Vice President of Business Owner Advisory Services. Josh is motivated by a strong desire to see business owners impact the world through their core values and entrepreneurial spirit. He is particularly intrigued by the unique opportunities and challenges that come with family-owned businesses, and he works hard to help them realize their full potential.
