SBA Deal Structuring w/ Rollover

June 20, 2023

by a searcher from New York University - Leonard N. Stern School of Business in United States

I know the SBA rules are still in draft, but was curious how folks have been thinking about transaction structure in light of these rules. One thing on my mind is retaining a majority (with meaningful equity rollover from the seller).

To illustrate, let's say you are considering a $1mm acquisition ($1mm is Uses in all scenarios).

1. Traditional Funding Sources:
900k SBA
100k Searcher

2. 20% Rollover Sources
200k Seller
720k SBA
80k Searcher

3. Example Majority Ownership Scenario Sources
50k Seller Rollover
150k Seller Note
720k SBA
80k Searcher

As you'll see, searcher ownership in #1 - #3, are 100%, 29%, 62%, respectively.

I have a few thoughts to retaining a majority (#3 is one workaround that I was thinking through), but curious if others have run into this as well. Happy to discuss directly if easier. Thanks!

Reply by a lender
from Bloomsburg University of Pennsylvania in Ambler, PA 19002, USA

James- great to meet you. My organization is a specalized SBA broker that works through transactions such as this (or strategizes with those that are looking at creative stucturing). Biggest item to note with either option #2/3 would be seller's willingess to personally guarantee the debt assuming they still hold a 20%+ share in the business. Feel free to reach out at any time if helpful in discussing redacted

Reply by a lender
from Eastern Illinois University in 900 E Diehl Rd, Naperville, IL 60563, USA

I would love to have a discussion and go over the various options you are considering. Also, the option to do a partial business buy-out is available now. We do have lending partners looking at transactions with this opportunity. I am more than happy to discuss what is available from the various lending partners we work with. You can ping me here or anytime at redacted Thank you.

+2 more replies.

Join the discussion