Glossary · People and paperwork
Prohibited Transaction
In short
This is a transaction involving an ERISA-governed retirement plan (like a 401k) that is deemed illegal due to a conflict of interest. Buyers using a ROBS structure must strictly avoid these to protect their retirement funds from severe penalties.
What it means in a deal
If you're funding your equity injection with a Rollover for Business Startups (ROBS) plan, the IRS and Department of Labor prohibit certain dealings between your retirement plan and you or your business. For example, your ROBS plan cannot lend money to you personally. Work with a ROBS specialist to ensure strict compliance.
Related terms
Common questions about Prohibited Transaction
- What specific types of businesses are prohibited from getting an SBA 7(a) loan?
- Are there any specific business industries that are generally prohibited from getting an SBA 7(a) loan?
- If a seller note is on standby, is the seller prohibited from any post-sale employment with the business?
- Who actually lends the money in an SBA 7(a) loan transaction?
- When is a business valuation required for a change of ownership transaction exceeding $500,000?
- When is a business appraisal required for a change of ownership transaction exceeding $500,000?
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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