Sba Guidelines On Owner Involvement Post-Acquisition

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03/05/2021 Redacted Redacted

searcher Georgetown University - The McDonough School of Business Brigham Young University

SBA GUIDELINES ON OWNER INVOLVEMENT POST-ACQUISITION

I am looking at a transaction that we are considering an SBA loan for financing.  100% of the equity will transfer; however, the owner wants (and we would be interested in if possible), a 3 year transition period.  My understanding is that post-transaction, no owner of the company may remain for longer than 1 year on a 1099 basis.  Any thoughts on ways to accomplish a longer transition on an SBA deal or ways you have dealt with this before?  TIA

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admin Massachusetts Institute of Technology - MIT Sloan School of Management Taylor University Stanford University - Graduate School of Business - 03/05/2021

^[redacted]‌ - you can find lenders on Searchfunder under the Directory tab at the top of this page. Here is the direct link: www.searchfunder.com/user/list/lender

Tagging a few Lenders that might be able to comment on this question: ^[redacted]‌, ^[redacted]‌, ^[redacted]‌, ^[redacted]‌, ^[redacted]‌, ^[redacted]‌, ^[redacted]‌, ^[redacted]‌, ^[redacted]‌, ^[redacted]‌, ^[redacted]‌, ^[redacted]‌, ^[redacted]‌, ^[redacted]‌, ^[redacted]‌, ^[redacted]‌, ^[redacted]‌, ^[redacted]‌, ^[redacted]‌, ^[redacted]‌, ^[redacted]‌, ^[redacted]‌, ^[redacted]‌, ^[redacted]‌, ^[redacted]‌, ^[redacted]‌, ^[redacted]‌, ^[redacted]‌, ^[redacted]‌, ^[redacted]‌, ^[redacted]‌, ^[redacted]‌, ^[redacted]‌, ^[redacted]‌, ^[redacted]‌, ^[redacted]‌, ^[redacted]‌, ^[redacted]‌, ^[redacted]‌, ^[redacted]‌, ^[redacted]‌, ^[redacted]‌, ^[redacted]‌, ^[redacted]‌, ^[redacted]‌, ^[redacted]‌, ^[redacted]‌, ^[redacted]‌, ^[redacted]‌, ^[redacted]‌, ^[redacted]‌, ^[redacted]‌, ^[redacted]‌, ^[redacted]‌, ^[redacted]‌, ^[redacted]‌, ^[redacted]‌, ^[redacted]‌, ^[redacted]‌, ^[redacted]‌, ^[redacted]‌, ^[redacted]‌, ^[redacted]‌, ^[redacted]‌, ^[redacted]‌, ^[redacted]‌, ^[redacted]‌, ^[redacted]‌, ^[redacted]‌, ^[redacted]‌, ^[redacted]‌, ^[redacted]‌, ^[redacted]‌, ^[redacted]‌, ^[redacted]‌, ^[redacted]‌, ^[redacted]‌, ^[redacted]‌, ^[redacted]‌, ^[redacted]‌, ^[redacted]‌, ^[redacted]‌, ^[redacted]‌, ^[redacted]‌, ^[redacted]‌, ^[redacted]‌, ^[redacted]‌, ^[redacted]‌, ^[redacted]‌, ^[redacted]‌, ^[redacted]‌, ^[redacted]‌, ^[redacted]‌, ^[redacted]‌, ^[redacted]‌, ^[redacted]‌, ^[redacted]‌, ^[redacted]‌, ^[redacted]‌, ^[redacted]‌ (To our Lender friends, THANK YOU for helping to make Searchfunder a collaborative community! Be sure to take full advantage of your UNLIMITED access to BVR Deal Stats, now available under the VALUATIONS tab at the top of this screen. With Best Wishes, ^[redacted]‌).‌

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lender Eastern Illinois University - 03/05/2021

Happy to discuss your potential situation and see if we can find a viable work around. It is hard to be more specific without getting some additional details on how you structured the deal. You can reach me at[redacted]or via email at [redacted] if you would like to discuss.

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lender Rutgers, The State University of New Jersey - 03/05/2021

Ben we specialize in placement of SBA debt solutions we have been in the business for over 30 years. I would be happy to chat with you you can reach me at [redacted]

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lender Northern Illinois University Southern Illinois University at Carbondale - 03/05/2021

Sure, As a direct lender, I have seen those types of situations before and I'm glad to discuss with you. Please feel free to touch base at [redacted] or[redacted].

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investor University of Virginia University of Florida - 03/06/2021

Can anybody that commented above please share ideas publicly for the benefit of all?

like reply | 1 like

lender University of Missouri - Columbia - 03/08/2021

Sam (and Benjamin) the only way a seller could arguably stay on is if they were in a position with zero ability to impact the business. The common example I have been told is that an individual selling a machine shop that wants to stay on and work on the CNC machines could probably stay on as long as they had no customer contact, decision making responsibilities, etc. Even then we would require the SBA to sign off on that. Jeff's answer below is well put. Main point being the seller needs to exit in 12 months as part of the APA/consulting agreement.

like reply | 2 likes

intermediary Indiana University at Bloomington Indiana University, Bloomington/Indianapolis - Kelley School of Business - 03/07/2021

You can not have a contract for employment or consulting at closing for longer that 12 months. There are no sba police if that person continues working after that, which I have seen many times happen as at an will employee. If they are adding value, then it is in the best interest of the company. The sba is primarily interested in stopping long employment agreements that artificially raises the purchase price and often are ghost employees.
but the old saying in the industry is “you never want to buy a business where the owner doesn’t want to stay 6 months and you never want to buy a business where the owner wants to stay longer than 6 months”. Meaning, transition as quick as you can and run the business.

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