Ways to get out of business due to partnership issues

January 04, 2024

by a searcher in Illinois, USA

We are running into partnership issues due to misalignment of goals and operations strategy.
There is SBA loan associated with business and was bought 6 months ago. Minority owners are not able to buy out the majority portion. There is GM and staff in place and business model is solid, long term customers.

What different ways majority owner can get out of the business ? Approaching the SBA lender for help in selling seems too risky.
Finding a broker to sell a business that was bought only 6 months ago doesn't seem feasible but seems like only solution available.

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Reply by a professional
from The Johns Hopkins University in Basking Ridge, NJ 07920, USA

As previously mentioned, my firm is OGC to businesses throughout business lifecycle through M&A/transaction. As a result of this role, we frequently address shareholder/member/partner issues and disputes. Unfortunately, the fact that the SBA is involved makes often messy situations more difficult. As you expect, the SBA will not be inclined to impair collateral or release guarantors. These issues are very fact specific and often require everyone eating a piece of "humble pie" to reach a result that always everyone to move forward - albeit likely not in a way that everyone is excited about.

I am happy to discuss offline, but if you are not already, you should look into the possibility of refinancing as part of any resolution.

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

If an SBA loan is involved you can do a partner buy-out but it is very unlikely the partner getting bought out, if they have signed a personal guarantee on the SBA loan, will be able to get that guarantee released. Usually the only option is to do an new SBA 7A loan to buy out that partner, but that can be challenging since typically you cannot refinance SBA debt with another SBA loan. Whatever you do would need to ultimately be approved by the SBA, whether it is a release of a guarantor or doing a refinance to buy that person out. Happy to have a discussion to go over options. You can reach me at redacted Good luck.

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