I'm under LOI with partial change of ownership terms. Great niche, recurring revenue, solid team.

The seller is not willing to PG. Seller is retaining a 7.5% share with limited rights -- equity roll with no operational role. We both love this arrangement.

I'd like to meet anyone who's funded a deal with a similar structure. If you are, please reach out on the thread or DM.

I'm working towards terms sheets with 4 lenders, all of them very helpful. It's been fiendishly hard to get consistent answers to the following questions:

1. Will the seller need to PG?

Specifically, will the SBA require the PG for a minority interest, regardless of what the bank's underwriting rules are? 3 say no, 1 says yes. One flipped from yes to no PG this week, which is great. ...I think. One wrinkle in our case: The seller bought out his partner 13 months ago, so seller's own equity share changed in the last 13 months. One lender thought this was a key point.

2. Can this be approved with the preferred lender program, or will it likely get "general program" treatment for all lenders?

Basically, is the SBA looking at every early buy-in deal 1-1? Are they letting preferred lenders use their own discretion for these early ones? I've heard both "very likely" and "very unlikely".

3. If I sign a loan commitment letter with this structure and it doesn't fit the most recent interpretation of the rules, does the deal fall apart?

For example, this scenario plays out:
- The loan goes to "general program" because the SBA is checking each buy-in 1-1.
- The SBA underwriter requires a PG based on that person's interpretation of the current guidance.
= The seller is not willing to PG, so the loan is denied.
- The way I understand the rules, denied projects need to cool off for 3-6 months before re-applying. This is the maximum downside risk in my mind. Seller and buyer would revert to a 100% sale to keep the deal moving rather than risk this, even though this is not desirable for either of us.

I'll send a handwritten thank you note to anyone that's actually funded a partial buy in, either as a borrower or a lender. I'd like to know what you experienced!