Two partners and SBA limitation

January 17, 2024

by a searcher from University of Pennsylvania - The Wharton School in San Francisco, CA, USA

How can one maximize the SBA loan with two partners and take out the full amount of up to $10mm by overcoming the exposure limitation of $5mm per business? Does anyone have any experience with this? Thank you in advance.

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Reply by an intermediary
from Florida State University in Boca Raton, FL, USA

Hey Ziya - the $5MM cap is attributable to the personal guarantor, not the business. And because the guarantee is unlimited, the liability is not pro-rata. Each personal guarantor is technically liable for the full principal balance of the loan regardless of their equity allocation in the entity. Unless majoirty of the project costs is towards owner occupied CRE, in which case the total project size could be $10MM+ by using a 504 loan.

Each "partner" could do the acquisition independently but that would result in just independently owning each business and not really being a partnership at all.

Reply by a lender
from Eastern Illinois University in 900 E Diehl Rd, Naperville, IL 60563, USA

Agree with the above. The only way two partners could maximize their exposure using SBA would be for one partner to own 81% or more of one business and acquire that using SBA financing while the other partner owns under 20%, and then switch it for the next business. The SBA exposure only counts against the guarantor, so in this way you could partner on two separate deals and get up to $10 million, but one would control one deal and the other the second deal. If you would like to discuss you can reach me at redacted Good luck.

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