Change of ownership with SBA lender

November 11, 2023

by a searcher in Illinois, USA

How to handle a change of ownership stake in the. business when SBA loan is involved ?

scenario 1 : with in first 12 months of acquisition of business
Scenario 2 : after 12 months of acquisition of business

We are inviting a senior member to join leadership role , she likes to have equity plus a management salary. We would like to put a proposal for the bank to review. As I understand Bank or sba dont entertain changing ownerships with in 12 months.

What if bank refuses to allow change of ownership at all. ? We may not be ready to refinance and incur unnecessary cost ( sba fee, legals etc for no reason).
Is there a creative way to address this.

We don't want to let go of this talent,.

Thank you in advance.

Reply by a lender
from Eastern Illinois University in 900 E Diehl Rd, Naperville, IL 60563, USA

I would be happy to have a discussion about your situation and options. You can reach me at redacted or here.

Just to be clear, within the first 12 months of the loan approval both the Bank and SBA have to sign off on any change in ownership. After 12 months the Bank has to sign off on the change in ownership. If the change benefits from the business, I would think the Bank and SBA would see that it does and would allow the change. If the new owner will own over 20% of the company, they will be required to guarantee the deal. So long as that individual did not own the company prior to acquisition, I would not think it should be an issue.

Reply by a searcher
in Rindge, NH 03461, USA

In the short term, I suggest you bring this person on and give them profit sharing instead of equity. Let them prove themselves, then deal with conversion to equity at a later date.

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