SBA LOAN QUESTION: CAN YOU GET 2 SBA LOANS FOR THE SAME TARGET?

I'm looking at a growing maintenance business with very predictable revenues and long term contracts. The company also has a lot of fixed assets (equipment installed at customer sites) and annual growth Capex requirements.

What I would like to do is created two acquisition entities with each taking out a separate SBA Loan: Entity 1 would own the maintenance business and Entity 2 would own the equipment and lease it to Entity 1.

Entity 1:
This entity would acquire the maintenance business from the from the Target excluding fixed assets (mostly equipment installed at customer locations). The company would take out a $3M SBA 7(a) loan for approximately 75% of the purchase price.

Entity 2:
This entity would purchase certain fixed assets (equipment installed at customer sites) from the Target and then lease them to Entity 1. Entity 2 would take out a second $3.0M SBA loan for 90% of the asset value. The loan would be fully amortized by lease payments over 5 years. Whenever new growth CAPEX is required, Entity 2 would take out additional SBA loans (once ever 6-12 months)

Entity 1 and 2 would have overlapping ownership. Total of SBA loans would be $6M. Can this structure work?



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