Glossary · Doing the deal
Assumption of debt
In short
This is when you, the buyer, take over an existing debt obligation from the seller. It means you become responsible for paying off that specific loan or liability going forward.
What it means in a deal
While common in some M&A, SBA 7(a) loans generally fund new business debt, not the assumption of the seller's existing business loans. If the seller has debt you want to keep, it's typically restructured or paid off at closing with the new loan proceeds, not assumed by you as part of the 7(a) financing.
Related terms
Common questions about Assumption of debt
- Can a buyer's assumption of existing business debt count as part of the equity injection?
- Can I use an SBA 7(a) loan for debt consolidation of existing business debts?
- What if the seller holds a significant portion of the acquired business's debt?
- Does having a high amount of personal student loan debt affect SBA 7(a) loan approval?
- How does a lender verify the full standby status of a non-SBA third-party debt?
- What level of debt service coverage ratio (DSCR) does an SBA 7(a) lender typically look for?
Defined by CapBench SBA Intelligence — plain-English definitions for business buyers, lenders, advisors, and AI agents, grounded in public SBA rules and records. Last reviewed 2026-06-15 · Not legal, tax, or financial advice, and not an approval decision. Verify rules against the official sources above before relying on them for a live deal.
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