I'm an investor interested in making an investment in a self-funded search deal using convertible debt. The debt would be convertible to 40% of the equity only after the SBA loan is due.
I researched this extensively and found that SBA SOPs allow excluding convertible debt shares from the fully diluted cap table for PG purposes if exercise or conversion is extremely remote. This condition would be met assuming conversion is only possibly after the SBA loan is paid off.
However, some SBA lenders are telling me upfront that convertible debt doesn't work for them, likely because the bank reps don't understand the nuances of the rules.
Can anyone recommend a SBA lenders who have done this before and will allow it?
Which SBA lenders allow convertible debt?
by an investor from University of California, Berkeley - Haas School of Business
More on Searchfunder
Searchfunder is an online community and toolkit for searchfunds. Over 80% of those involved in searchfunds maintain a Searchfunder.com account to help them network, problem solve challenges, and keep up with the industry.
We maintain partnerships with database providers that make searching more effective, efficient and affordable along with features that help searchers find deals and investors and vice versa.
We maintain partnerships with database providers that make searching more effective, efficient and affordable along with features that help searchers find deals and investors and vice versa.
137 views
6 comments
Sign in to see all replies.
Create an account.