Partnering on a deal along with an SBA loan

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November 29, 2022

by a searcher in Illinois, USA

Looking for suggestions & guidance on how to structure a deal when you have partners and one of the partners is taking on an SBA loan.

This is self funded deal and partners will bring their own money to fund the initial equity requirement for SBA loan.


Thank you in advance.
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Reply by a searcher
from California State Polytechnic University in Pomona, CA, USA
As many have stated, anyone with more than 20% or more ownership will have to be on the personal guarantee for the SBA loan. If you are looking for a structure in which only one of you takes on the risk, then some sort fo partnership equity split would need to be in effect so that the only person on the PG would owns more than 20% equity in the business. How you split up ownership is up to you, not solely based on the amount of investment.

With a bit more detail on what you are trying to accomplish, with some rough deal numbers, I am sure the guidance you are seeking would be much more valuable.

Remember also that there are certain guidelines that the SBA places on the loan structure and then the lenders themselves can apply an additional set of rules. Within SBA guidelines, what works for one bank might not work for another.
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Reply by a searcher
from Emory University in Marietta, GA, USA
There are so many options on how to partner and structure that makes this question to vague. There are many questions that a banker will ask you that will tilt the scales in a different direction. For example: is there land involved? Who will own more than 20%? Are they comfortable with a personal guarantee? Does this ship internationally? What seller note is the seller interested in taking? Do they mind putting 5% on standby for the life of the loan? Who will be the Day to Day operator? Do you know if you can get a 10 year lease? Who's life insurance will cover the loan? And I'm just getting started. But your bankers are the best bet. Don't promise anything until you have your bankers and lawyers on the same page. Good luck.
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