Does anyone have specifics on a structured SBA 7(a) loan they can share?

November 21, 2018

by a searcher from Pepperdine University - Graziadio School of Business and Management in Baton Rouge, LA, USA

I'm looking for an example, spreadsheet, or sample language on some form of synthetic equity roll (ESOP equivalent or distribution/liquidity rights) and earn-out (forgivable carried note, etc.). I have bankers looking in to it and I read the SOPs but, the bankers keep turning to the SBA to ask questions and don't have examples that were previously accepted. I'd like to arm them with such examples if anyone would care to share either on or offline. Thank you and Happy Thanksgiving.

Reply by a searcher
from University of California, Berkeley in San Francisco, CA, USA

I believe the program is setup to prevent the rolling of equity. There are probably ways to circumvent that with the structure, but a lot of the easiest ways (like forgivable seller notes) run into the problem that they make the overall deal valuation higher than the FMV appraisal will support (which is required to get an SBA loan). There is one solution I have seen if you have a married seller - give the equity to their spouse which shouldn't be a SOP violation because it is not the same equity owner. If you send me more details I can give you some additional potential approaches that might work.

Reply by a searcher
from Babson College in Boston, MA, USA

Ryan - If you don't get what you are looking for, I suggest reaching out to an SBA affiliated Small Business Development Center near you/target. I have found some of their advisors to be very helpful. Here's the link: https://www.sba.gov/tools/local-assistance/sbdc

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