Glossary · People and paperwork
Non-compete
In short
The seller's promise to stay out of the same business nearby for a set time. Standard in every purchase agreement; lenders expect it.
What it means in a deal
The non-compete clause prevents the seller from opening a competing business, poaching employees, or contacting former customers for a defined period — typically two to five years within a defined geography. Lenders require non-competes because the business's goodwill (which they're partly financing) would evaporate if the seller immediately went across the street. Negotiate the geographic scope and duration carefully; courts in some states won't enforce overly broad non-competes.
Related terms
Common questions about Non-compete
- For a partner buyout, what if the departing partner also has a non-compete payment?
- Does the departing partner need to sign a non-compete agreement for an SBA-financed buyout?
- What is the importance of a non-compete agreement from the seller in an SBA 7(a) acquisition?
- Can I include the cost of a non-compete agreement with the seller in my SBA 7(a) loan?
- Are funds from a non-U.S. citizen or non-resident investor acceptable for equity injection?
- Are non-owner spouses always required to personally guarantee SBA loans?
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 2026-06-16 · 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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