Funding SBA equity injection using partial buyouts / equity rollover?

January 10, 2025

by a searcher from Columbia University - Columbia Business School in New York, NY, USA

Hello, looking for some SBA experts' opinions-

The SBA rules now allow for partial buyouts and "rollover equity" in the 'multi-step change of ownership' SOP recently released.

Previously, you couldn't use a partial buyout to eliminate all or part of the 10% equity injection required for an SBA loan.

Is this accurate / has this changed with the new SOP update?

For instance, are there any lenders who'd allow the following sources of acquisition funds: 80% SBA loan, 10% seller note, 5% seller equity roll, 5% cash injection?

Reply by a lender
from California State University, Sacramento in Seattle, WA, USA

^redacted‌ has that right. The equity injection via the B/S rules are the same for both the PCO with Stock sale and the Asset Sale options. You just need to find a lender that will essentially allow 100% financing with no new cash injection from the buyer. Even though the SBA rule might allow that, unless you're the key manager buying the company, most lenders (including this one) are going to require new cash injection from the buyer/guarantor. My same mantra....Beware of over-leveraging your SBA loan. The basics of the program already allow for a highly leveraged transaction, beware of further over-burdening and already very generous financing structure. ^redacted‌

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

Correct, the equity injection requirements did not change with the updated rules. You would have to use the balance sheet equity after layering in the new debt. Happy to discuss this in more detail if you like. You can reach me here or directly at redacted

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