Best way to structure SBA deal with investors

April 19, 2022

by a searcher in Dallas, TX, USA

Planning on doing a self funded search and structuring the acquisition as: 10% equity, 10%seller note, 80% SBA loan.

For the equity portion I plan to raise it from 1-2 investors likely around $200k-$500k depending on the company I find.

I have heard that attractive terms are to give 15% equity to the investor(s) for. their 10% injection, which keeps them under the SBA PG line.

For those who have done a deal like this - is this the best way to structure the deal and terms for the investor and entrepreneur? Additionally any tips on how to identify good value add investors?

Thanks!

Reply by a lender
from California State University, Sacramento in Seattle, WA, USA

‌+1 to Hugo and Brad from the Lender perspective regarding investors and equity, ^redacted‌ and ^redacted‌ have created and Equity Workbook Template that helps our searchers do the math on 'economic benefit' of investor's common + preferred structures to ensure you're meeting SBA rules and the spirit and intent of the 20% rule. Email redacted and we're happy to share our sba equity template.

Reply by a searcher
from University of Notre Dame in Dublin, OH, USA

I would consider checking out the breakdown on https://www.etainvestors.com/

Structures with investors typically include a preferred return "hurdle" rate (usually 8-10% annually) as well as a participation in the common (which can range wildly from 20-80%).

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