adding an EE to the cap table

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September 29, 2022

by a searcher from The University of Chicago - Booth School of Business in Denver, CO, USA

I have a 7(a) loan on a catering business I own, and I have a key employee that I want to give a piece of the company. Is there a % amount above which the SBA starts to want their financial statements? If someone has experience with any threshold like that, I'd love to hear about it.

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Reply by a searcher
from Rensselaer Polytechnic Institute in Durham, NC, USA
20% or above and they need to provide a PG. SBA also requires "key employees" to complete a form###-###-#### it's up to how you frame things with your bank whether they consider this person a "key employee" by SBA definitions. I've also heard that some banks will require (above and beyond SBA reqs) a PG from named key employees. I'd clearly aim to avoid that at all costs.
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Reply by a searcher
in Austin, TX, USA
you can give phantom equity. or a option (at low price) vested in 2-3 years so that the employee stays.
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