SBA 7a Loan : adding member retroactively

by a searcher

4 months ago

Hello,

We acquired a business using have SBA 7 am loan last year. We would like to add a member retroactively to the entity and offer him 15% equity from year###-###-#### We plan to add him to entity by amending the articles of incorporation. 

I am curious if this something needs to be reported to lender as well as SBA ? and are their any legal issues or would IRS flag it ?

Thanks in advance.

0 likes
92 views
5 comments

searcher from Rutgers-The State University of New Jersey-Camden - Rutgers School of Business

I had this conversation for one of my SBA loans. My lender said as long as you're transferring less than 20% of ownership, there's no issue from them, but they do need to review the equity agreement and the revised operating agreement for the LLC. Anything 20% or more would be quite complicated, as that would essentially be a loan modification with a new personal guarantor. This was more than 12 months into our loan term so I can't speak to the 12 month SBA notification requirement that others mentioned.

4 months ago | like reply | 0 likes

intermediary from The University of Chicago - Booth School of Business

It is my understanding that SBA APPROVAL is required if there is ownership change during the first 12 months. Not required afterwards.
I do not know what happens if the company issues new shares for consideration. ^Searchfunder member‌ answer addresses this.‌

4 months ago | like reply | 0 likes

More on Searchfunder

Just Closed on My First Deal! Reflections and Takeaways for other Searchers

45,152 transactions are available on Searchfunder (now searchable by keyword)

Now everyone has unlimited IBISWorld access

Family office looking for traditional searchers

Investor seeking Self-Funded Search Deals

2 Best Ways To Find Motivated Sellers, Off-Market Deals

Downsides of "buying a job" below 750k+ EBITDA?

6-7x for a Self-funded Search Deal?

Searchfunder is an online community and toolkit for searchfunds. Over 80% of those involved in searchfunds maintain a Searchfunder.com account to help them network, problem solve challenges, and keep up with the industry.

We maintain partnerships with database providers that make searching more effective, efficient and affordable along with features that help searchers find deals and investors and vice versa.