New SBA SOP 50 10 8.1 and Partial Changes of Ownership

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by a searcher from University of Pennsylvania - Philadelphia
in Minneapolis, MN, USA

1h ago

New SBA SOP 50 10 8.1 and Partial Changes of Ownership

Hey all, I'm looking for input from this community around partial changes of ownership under the new "Initial Acquisition" transaction type as defined by the new SBA SOPredacted. The language in the SOP itself seems pretty clearly to state that a seller must 100% exit under any transactions categorized as an "Initial Acquisition". Additionally, for a buyer who is not already associated with a business, the new "Partial Buyout" category allows a buyer to purchase no more than 50%. If interpreted literally, I take this to mean that any partial changes of ownership more than 50% but less than 100% are no longer allowed. That said, I have a lender who is confident this is not the intent of the new SOP. He and his bank are moving forward continuing as planned to submit loans with partial changes of ownership (i.e. buyer takes 90%, seller retains 10%). Is anyone else getting mixed messages on this? It's been challenging to get a definitive answer on this, so I wanted to post here to see if others are seeing this, too.

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reply by a lender 1h ago
in Falmouth, MA, USA

That’s how SBA wrote the new rule. For example, to acquire 85%, the buyer needs to already be an employee of the business. We have one partial employee buyout underway where the buyer joined the company earlier this year.

reply by a lender 20m ago
from Eastern Illinois University in 900 E Diehl Rd, Naperville, IL 60563, USA

Although it is possible the SBA could still make some changes to the new SOP, and I hear a few are in the work, the current language restricts partial changes of ownership where the buyer would like to own 50% more of the business but does not already have a role at the company. So this would not work for you if you are a third party partial acquirer. If the rule goes unchanged, the lender you are working with could go through the whole process, submit the loan to the e-tran system to get the authorization pulled, and have it rejected in the end. Just something to be aware of.