I'm under exclusivity on a self-funded search acquisition and raising ~$1.5M of equity through a preferred/common structure standard in the self-funded world. The preferred investors would convert into ~30% of the common equity, while I retain 70%. I have a few family offices interested in investing and am trying to figure out what the maximum equity investment is per investor without them having to co-sign a personal guarantee. I'm getting very different responses depending on who I talk to and the SBA lender does not know for sure quite yet.

Is the 20% maximum threshold per investor dependent upon the common equity or is it based on the equity dollars invested (i.e. the preferred class)?

For simplicity, let's just assume I'm not investing anything and $1.5M is total amount of equity investment in the business. If it is based on the common equity ownership, it would imply one single investor could invest up to $1.0M without having to sign a personal guarantee ($1.0 max investment / $1.5 total equity = 2/3 of Investor Common Equity x 30% Pref Conversion = 20% Common Equity). If it's based on the total dollars invested, it implies the maximum equity investment from one investor is $300K. I have been told both from various people including SBA lenders, loan brokers, equity investors, lawyer, etc.

Any views on this would be appreciated.