Back in March, we flagged something that had us genuinely concerned: the SBA appeared to be barring minority, non-controlling investors from future SBA-backed transactions if any deal they'd previously invested in had defaulted - even if they owned as little as $1 of equity and had no operational control whatsoever. Today, the SBA issued an official policy notice that addresses this directly. Effective June 1st, the SBA has clarified that it can issue waivers for minority investors with prior losses - preserving what would have otherwise been a significant disruption to the capital markets that fund American small business acquisitions. To qualify for a waiver, the investor must have: 1. Owned less than 20% of the entity that defaulted 2. Not been a guarantor or co-borrower on the defaulted loan, 3. Not had any control over the business that caused the loss. From there, the SBA evaluates the full circumstances on a case-by-case basis. This is consistent with what the SBA communicated to us directly when we escalated this issue in March, and it is encouraging to see it formalized in writing. What could have been a show-stopper for a meaningful portion of the ETA investor community is being addressed thoughtfully. Over the last six months, we've closed investments in four small business acquisitions: 1) a tombstone engraving company, 2) an industrial insulation business, 3) a homecare and hospice operation, and 4) a residential HVAC company. Each one has been a reminder that the lessons that matter most rarely show up in the CIM. A few things that have stood out: • Strong gross margins and a favorable cash conversion cycle are underrated deal criteria. • Supplier relationships and supply chain redundancy matter more than most buyers model for. • Spending time “in the field” to understand each key function of the business pays dividends. • A business with real management layers below the owner is worth paying up for. • Cash is king. Growth is expensive, and so are unexpected disruptions in your business (which are to be *expected*). Looking hard at overhead, pricing, and every line of expenses early is not optional, it's the key to survival. • In a turnaround, the most important thing you can do early is drill down to bedrock, understanding what is actually happening with revenue, expenses, margins, and operations, before you try to fix anything. I shared a more detailed breakdown of each business and what we've learned so far in a recent LinkedIn post. If you're evaluating deals or early in ownership, I’d love to hear other insights you’ve had. Plus: • Over the last six months, we've closed investments in four small business acquisitions: 1) a tombstone engraving company, 2) an industrial insulation business, 3) a homecare and hospice operation, and 4) a residential HVAC company. Each one has been a reminder that the lessons that matter most rarely show up in the CIM. I shared a more detailed breakdown of each business and what we've learned so far in a recent LinkedIn post. If you're evaluating deals or early in ownership, I’d love to hear other insights you’ve had. • We analyzed 3,059 SBA business acquisition loans of $2M+ made between 2018 and 2021 and pulled out 10 insights. Some of them are surprising, including the fact that the real "loss rate" is closer to 10% than the 2% you often hear, and that ecommerce topped the list at a 41% loss rate. Full breakdown here. • Drafting an LOI and looking for help? Check out Baton’s free LOI tool, which has been used on $1B+ in closed transactions. • Your quarterly reminder (always with fresh evidence to prove this point): Even if you’re burned out in your search, don’t settle for the wrong business. Keep going. I love what Tim Ericson says in this post - and it’s so true: “The cost of walking, or pushing harder at the table, is always smaller than the cost of operating the wrong deal for the next ten years.”redacted