Change of ownership with SBA loans

by a searcher from Northwestern University - Kellogg School of Management

Mar 24,2023

We are acquiring a company by using  an SBA 7a loan.  After the deal closes, we'd like to bring in some outside investors and essentially do a recap where they will owen 33%.

The only information I can find online about this is some statements in 2020 saying the SBA needs approve.  But it was mainly related to PPP loans, and nothing specifies why they would or would not approve.  Does anyone know if the SBA does allow for changes to the cap table within the first 12 mos of an acquisition?

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searcher from Brigham Young University - Marriott School of Management

Very helpful insight.

03/27/2023 | like reply | 0 likes

lender from Eastern Illinois University

I concur with Lisa, any changes in the first year need SBA approval. Post the first year you are required to inform the lender. If anyone ends up with an ownership interest over 20%, they would likely be required to guarantee at that point. Another issue to keep in mind is where the funds go for any capital that comes in. The funds likely need to stay in the company. If you provide year-end tax returns as is required in the SBA loan documents, they would see a change of ownership there. Typically speaking Banks will not call an event of default for failure to provide updated financial statements because of fear the SBA will not back the guarantee on an otherwise performing loan, but it is still a best practice to stay in compliance with your lender. If you do not and something happens, it could be an issue for you down the road. Happy to have a discussion if you would like more information. You can ping me here or directly at --@----.com

03/27/2023 | like reply | 0 likes

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