Hello all,
With the recent changes to the SBA program, I understand that the seller portion used in lieu of equity must be on full standby for the life of the loan. However, what happens to the actual equity portion? Can dividends be paid out/are there new restrictions? And can capital be returned if the business is performing well? This may be a basic question but significantly impacts the IRR portion of the math even though cash on cash return may still be the same.

As an example, let's say there is a $250k EBITDA business purchased at $1M with 800k SBA loan and 200k preferred equity. Suppose the SBA is ~8% interest rate and there is 8% preferred return on the equity.
- The SBA per year amortized payment is ~$116k
- The preferred return piece per year is $16k

So based on the above scenario, there would be still be###-###-#### = 134) $134k of EBITDA left after paying the SBA amort.
So the 1st question is, can the business now pay the $16k preferred out to the equity holders?
The second question is can the business do a return of capital and return say $30k to the preferred equity holders?
Are there any additional consideration here we should be aware of?

Appreciate any insight.