Experience moving PG off of a 504?
November 06, 2023
by a searcher from Columbia University in New York, NY, USA
I am contemplating using a SBA 504 Loan to close on a deal. I am interested in (and have a partner interested in) moving the PG from me to them.
I'm interested if anyone has done this successfully, and if yes, what structure or documentation was used, and how you maintained SBA compliance while doing so.
For example, this may be doable up front by putt my stake in warrants rather than common; by creating a new class of common without any voting rights; or by creating a side letter that moves PG obligations over. There may be other ways too, and I'm trying to get smart on feasibility as well as pros and cons.
from Eastern Illinois University in 900 E Diehl Rd, Naperville, IL 60563, USA
In the update that just came out to the SBA Standard Operating Procedure ("SOP"), the SBA is now allowing substitute guarantees per the language below. I am not aware of this having been done yet as the new rules go into effect on 11/15/23 and I do believe the SBA is going to require a replacement guarantor we someone other than another required guarantor already in the deal. But this may be possible, but again, it has not been done yet to my knowledge. I hope this information helps. You can reach me at redacted with any additional questions.
4. Substitution of Personal and/or Corporate Guaranty Liability The purpose of the use of guaranties for SBA loans is to mitigate against the risk of loss to taxpayers. To ensure this objective can be achieved across different types of SBA loans and financial transactions, SBA allows third-party individuals or entities to assume the liability of a personal or corporate guaranty, as applicable, for the guaranty of the individuals and/or entities that would otherwise be required to make a personal or corporate guaranty for an SBA loan. If the personal or corporate guaranty liability is assumed by a separate entity or individual, the substitute guarantor must have a similar or greater value, and the personal/corporate guaranty liability agreement or transfer agreement must be submitted to the SBA Lender as part of the complete loan package. If a substitute guarantor will be used, SBA Lender must identify in the E-Tran terms and conditions both the substituted guarantor and the individual or corporate entity being substituted, and if applicable, the personal/corporate guaranty liability agreement or transfer agreement must be submitted to the SBA Lender as part of the complete loan package.
from Columbia University in New York, NY, USA