SBA compliant short-term lease

searcher profile

January 06, 2026

by a searcher in Chicago, IL, USA

I'm looking at a deal where the seller would like me to vacate the property within 3 years of close, but the owner understands that the SBA requires a lease matching the loan term (10 years in this case). I told the owner that I would respect that timeframe, and am willing to write the lease to include options. Would the SBA/bank approve a 2-yr lease, with eight 1-yr options?
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Reply by a lender
from Cornell University in Los Angeles, CA, USA
Hi Anon - nice to meet you and happy to share some insights for this one. A 2-year lease with eight 1-year renewal options can work for an SBA 7(a) loan, as long as the renewal options are controlled only by the tenant/borrower (not mutual and not subject to landlord approval) and the total term adds up to at least the loan term, meaning the base term plus the tenant-only options equals or exceeds 10 years. It's important to draft the commercial lease agreement so the renewal rights are real and enforceable, without landlord termination language that effectively cancels the options, and so the bank can obtain the usual lease assignment and landlord waiver. Even though the SBA rule supports this structure, some banks still prefer a longer “firm” base term, like a 5-year lease with renewal options, to reduce renewal risk. But if it’s drafted cleanly, 2 years plus eight 1-year tenant-only options can be acceptable. We have a lot experience financing various companies via the SBA. If you ever need help reviewing a deal, I am happy to help. We work with all the major SBA lenders. The bank pay us after your loan closes, so this is a 100% free service for you.You can email me directly at redacted or schedule a meeting with me: https://cal.com/francodeguzman/30min. Look forward to chatting!
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Reply by a lender
from Eastern Illinois University in 900 E Diehl Rd, Naperville, IL 60563, USA
Franco is correct on the structure of the lease above to achieve 10-years. However, from time to time we have been able to get SBA lenders to waive the 10-year lease requirement. If the space the business operates from are not key to operations and there is plenty of similar space available in the market, it is possible to get them to waive the 10-year lease requirement. However, if the space is key to operations like a built out industrial manufacturing facility or key retail location, then it can be hard if not impossible to get lenders to waive the requirement. I would be happy to get on a call and discuss your specific situation and see what might be possible. You can reach me here or directly at redacted Good luck with the search and negotiations.
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