Glossary · Doing the deal
Restrictive covenant
In short
A clause in a contract that limits a party's actions, such as a non-compete agreement preventing the seller from opening a similar business nearby. These protect your newly acquired business.
What it means in a deal
In an acquisition, common restrictive covenants include non-compete clauses, non-solicitation clauses (preventing the seller from poaching employees or customers), and confidentiality agreements. These are crucial for protecting the goodwill and value you're purchasing. Ensure these covenants are clearly defined, reasonable in scope and duration, and enforceable.
Related terms
Common questions about Restrictive covenant
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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