SBA 7a + Private Credit (Is this or done before possible?)

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by a searcher from Harvard University - Harvard Business School
in New York, NY, USA

1mo ago

SBA 7a + Private Credit (Is this or done before possible?)

Are these deals possible or been done before? Hypothetical scenario ++ $5mm purchase price -- $4mm debt, $1mm equity ++ Funded with $2mm SBA 7a + $2mm Private Credit ++ SBA 7a is 10-yr amort but Private Credit is 5yr IO and bullet in Year 6 ++ Split as such in order to preserve cash for business growth I know there will be broader implications on equity returns and thus ownership between searcher and investors but just curious if this SBA + Private Credit structure is possible. Fairly new to SBA world so I'm unsure

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reply by a lender 1mo ago
in Ponte Vedra Beach, FL 32082, USA

Short answer: not in the way you’ve outlined. With a 7(a), the SBA lender must be senior on operating assets and any additional debt has to be fully subordinated with a standby agreement—no required payments, no accelerated amortization, and no balloons while the SBA loan is outstanding. So the private credit piece you’re describing would function more like true mezz, not a parallel facility, and the pool of lenders willing to sit behind SBA under those terms is pretty limited. You do occasionally see SBA + seller notes or subordinated investor debt structured to SBA rules, but preserving cash via a 5‑year IO + balloon alongside SBA generally isn’t permissible. If cash flow flexibility is the goal, it’s usually better addressed through equity structuring or a non‑SBA senior facility instead. Happy to hop on call together to discuss options. My cell isredacted, email is redacted Please feel comfortable scheduling a call directly via below booking link. redacted

reply by a lender 1mo ago
from Eastern Illinois University in 900 E Diehl Rd, Naperville, IL 60563, USA

Technically it is possible. However, the private credit lender will have to agree to be fully subordinate to the SBA lender. We often do not find them willing to do that. But if they are willing, then this is possible. The seller note term is not an issue as that appears to be a bullet at year 6. I would be happy to discuss this option and general SBA financing in more detail if you like. You can reach me here or directly at redacted