Recent SBA rule updates!

One of the most important recent SBA rule updates was highlighted recently by Matthias Smith — and it’s one every buyer using outside capital should understand. The SBA has clarified its stance on preferred equity: it’s still allowed as part of the buyer’s capital injection, but only if it acts like true equity — not disguised debt. Now explicitly disallowed: - Fixed redemption schedules - Investor put rights - Accrued but unpaid preferred returns due before SBA loan maturity - Compounding PIK (payment-in-kind) returns with fixed timelines What remains acceptable: - Discretionary returns - Non-cumulative structures - Subordination to all senior debt - Repayments only tied to available post-debt cash flow In other words, preferred investors can participate, but they can’t demand a return on a set schedule. Why this matters? These types of nuances are exactly why working with a commercial loan brokerage is so valuable. We're in constant contact with lenders, tracking regulatory changes, and helping buyers structure their deals to maximize lender appetite while staying compliant. Our advice: - Involve legal counsel early if your deal includes preferred equity. - Be ready to show a legal memo if there are complex terms or protections. - Even if SBA-compliant, individual lenders may still pass based on their own risk posture — so understanding their preferences matters. Staying ahead of policy changes is key — and we’re here to help you navigate them. Let's connect! https://calendly.com/rafael-pioneercap