Main Street Lending to Acquire a Business

December 30, 2020

by an investor from New York University in St. Louis Metropolitan Area, USA

I found a very profitable business and would like to find a way to acquire it using an MSL loan. Is there a creative way to do this?

For example, could the current owner apply for the loan then sell me his shares in the business? I know MSL has a prohibition against distributions to shareholders so how would the seller be able to get the cash for the sale of his business once the MSL loan proceeds are in the bank? There must be a creative way to get this done.

Reply by an investor
from University of California, Berkeley in San Francisco Bay Area, CA, USA

Primarily two reasons: 1. While structurally doable, lenders felt that using MSL for acquisition financing wasn't the intent of the program and would not pass their committee, 2. MSL allowable fees are too low to justify the effort

Reply by an investor
from New York University in St. Louis Metropolitan Area, USA

I, too, heard that it's legally possible. Do you have any details, ^redacted‌? Why weren't the lenders you spoke to willing to do it?

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