SBA-Financed Acquisitions

SBA rules require the buyer to contribute part of the purchase price as an equity injection, and lenders may ask for more depending on the deal. In some cases a seller note on full standby can count toward that contribution. The amount and what counts toward it come from current SBA rules and the lender's credit policy, so we confirm both early.

In most cases, yes. SBA rules require a personal guaranty from each owner above an ownership level the SBA sets, and lenders can require guaranties from others. The guaranty is one of the loan documents, which the lender's counsel prepares.

Generally, no. SBA rules require the purchase price to be fixed at closing, so seller earn-outs aren't allowed in an SBA-financed purchase. The current rules do allow a buyer rebate, where the seller refunds part of the price if the business misses agreed targets and the refund goes toward the SBA loan. Buyers and sellers also share risk through seller financing, subject to the lender's standby terms.

Lenders typically review the purchase agreement, the allocation of the price among the assets, the bill of sale, any seller note and standby agreement, the lease or lease assignment, and the consents needed to transfer the business. We send drafts to the lender early so its comments arrive before the documents are final.