SBA seller retained equity question

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by a searcher from Harvard University
in Toronto, ON, Canada

2mos ago

SBA seller retained equity question

Calling in SBA pros here! Seller rolled 19% equity with 2 years PG. Is he allowed to hold the shares under his holdco than his personal name? Will that impact any SBA covenants? Sunny

1 Like

150 Views

reply by a lender 2mos ago
from University of Missouri in Denver, CO, USA

They would likely need lender approval. The loan authorization usually includes a covenant prohibiting a change of ownership which I believe the SBA would see that as even if it is both owned by them.

reply by an intermediary 1mo ago
from The University of Chicago in Chicago, IL, USA

I am not an SBA lender. Imo, or at least my interpretation is that SBA does not allow "equity rollover", however, SBA does allow seller "retaining" equity of the entity that the buyer is buying. I have done many rollover deals (all non-SBA), and they are different than the retained equity deals. You are tops in finance/accounting. x% of unlevered equity value is not the same as x% of levered equity value.