The SBA Update came out today with some changes. Most of this update offered clarifications related to what was in the previous update that came out in August of###-###-#### I am still digesting all of the changes and will come back with a more comprehensive summary of the changes in the next few days, but I wanted to get an update out of some of the major changes that I feel directly impacts this community specifically.
1) If you do a partial business acquisition, the SBA has clarified that they will determine whether a seller needs to guarantee a loan or not based on their post acquisition ownership interest. So long as the seller owns less than 20% of the company post sale, even if they owned more than 20% of the company prior to the sale, the SBA has confirmed they will not be required to guarantee the loan. This is a big change because there was some concern this provision could go away, which would have largely killed the benefit of a partial business acquisition.
2) The SBA added language that allows for the substitution of a personal and/or corporate guarantee. In essence they are allowing third party individuals or entities to assume the liability of a personal or corporate guarantee. The substitute guarantor must offer a similar or greater value. I will try to get additional details on this new provision to share shortly.
3) The SBA in the August update had gotten rid of the ability to do a 25 year term loan for both business and real estate debt if the real estate debt was 51% or more of the total transaction. The ability to use the 25-year term is now back in effect so long as the real estate is 51% or more of the transaction amount.
4) The maximum SBA 7A loan for a business acquisition is capped at the business valuation amount. However, if the business valuation is lower than the sales agreement, the shortfall may be financed with a non-guaranteed loan so long as it is subordinate to the SBA 7(a) loan.
I think these are the major changes impacting this community that I have identified at this point. Again, once I complete a more comprehensive review I will certainly provide more feedback. Good luck to you all in your searches.
SBA 7A Program Updates 10/24/23
by a lender from Eastern Illinois University
More on Searchfunder
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.
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.
235 views
30 comments
Sign in to see all replies.
Create an account.