SBA lender asking for my LP’s tax returns

searcher profile

January 23, 2022

by a searcher from University of Colorado at Boulder in Los Angeles, CA, USA

So I’m trying to get SBA 7a/504 loan for my real estate fund’s hotel project and one of my LPs is over 20% of the fund. The bank is requesting tax returns from my large LP, which we would like to avoid. Has anyone else dealt with this issue? Any thoughts/advice appreciated. Thanks

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commentor profile
Reply by a lender
from The University of Chicago in Schaumburg, IL, USA
Spot on; as a SBA lender, we are required to fully diligence and obtain an unlimited guaranty from anyone having a beneficial interest in the target of 20% or more. 10% - 19.9% holders are likely to be diligenced but do not have to guaranty. Holders at a level of less than 10% may or may not be seriously diligenced.
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Reply by an investor
from University of Pennsylvania in Washington, DC, USA
Yep - if an investor is over 20% of economic interest of a deal (can be lower than 20% equity if a preferred), they are signing up for a PG as well so tons of additional work. In almost all SBA 7a deals, investors are kept under 20% for that reason.
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