I have some “under the hood” questions about ownership and equity breakdowns. All thoughts and feedback are welcome!

As we know, if you get an SBA loan to acquire a business, anyone with more than 20% ownership must sign a personal guarantee.

My question is how are folks structuring deals with their equity investors?

For example, if you had a $5mm business doing $1mm in EBITDA.

You raise $1mm in equity and $4mm in an SBA loan.

My brain traditional goes to a 70/30 split where the investors own 70% and the searcher gets 30%. This would leave 70% to divide amongst possibly 10 investors ($100k each).

However, that would not get the deal done to satisfy the bank. So you need someone with a big enough net worth and 20%+ ownership in the deal.

As you raise your search fund, are you finding someone up front to agree to a large capital investment AND for them to sign on the debt?

For context, I would like to structure a deal with an investor where they 3x their capital and retain ~1/3 ownership in the deal.

any advice or thoughts?