Glossary · Reading the business
Related-Party Lease
In short
A lease agreement where the business leases property from its owner or an affiliated entity. These leases require scrutiny because terms might not be "arm's length," potentially inflating expenses or masking true profitability.
What it means in a deal
During due diligence, carefully evaluate any related-party leases for commercial real estate or equipment. Lenders will want to ensure the lease terms are at fair market value. If the lease payments are excessive, the lender might "normalize" them to market rates when calculating cash flow, affecting the business valuation and your ability to qualify for the loan.
Official sources
13 CFR Part 120 — Business Loans
Office of the Federal Register · Federal regulation
SOP 50 10 — Lender and Development Company Loan Programs
U.S. Small Business Administration · SBA Standard Operating Procedure
Last checked 2026-06-15. Official sources control — verify before relying on any rule for a live deal.
Related terms
Common questions about Related-Party Lease
- When is an independent business valuation required for an SBA 7(a) acquisition, especially for related party transactions?
- If the business property is leased, can the SBA loan finance a security deposit for the lease?
- If the business property is leased, can an SBA 7(a) loan finance security deposits for the lease?
- Can an SBA 7(a) loan finance tenant improvements on leased property if the lease term matches the loan term?
- If I am buying a business that leases its property, can I get a longer loan term if the lease is long-term?
- Why does the SBA combine the size of related businesses when checking loan eligibility?
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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