Partnership buyouts using SBA?

by a searcher from Utah State University - Jon M. Huntsman School of Business

1 year ago

Has anyone used the SBA to facilitate a partnership buyout? Is this a feasible strategy? I have sellers willing to let me buy in to a small % of ownership and then use a partner buyout in a year or so. The thinking is that my year of experience in the business can strengthen the loan application. Does anyone have experience with this?

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5 comments

searcher from New York University

Effectively, it seems like the first de minimus purchase could not use the SBA, however SBA could be used when you buy out all partners and acquire the business in the future.

1 year ago | like reply | 0 likes

lender from Eastern Illinois University

The SBA will only fund partnership buyouts if an existing partner(s) is buying out the other partner(s). You cannot bring a new investor / owner into a partnership buyout. If you do, it no longer qualifies for SBA financing. If a new owner is coming in, they must buy out 100% of the ownership interest of the company. None of the existing owners can stay on with an equity ownership interest. I know this is frustrating for a lot of clients, but I understand the reason the SBA has this rule in place is to avoid companies using the SBA loan product to recapitalize ailing businesses by bringing one or two new investors in. The SBA wants to ensure any buyout the new parties are in full control.

1 year ago | like reply | 1 like

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