Assigning an SBA loan

April 16, 2025

by a searcher from INSEAD in Miami, FL, USA

Working on closing a deal that has an SBA loan from '20. Seller and I had checked with SBA during DD, and they agreed it could be assigned, however, as we're getting ready to close it seems they think he should be paying it off, especially if he's going to provide a seller note. Does anyone have experience getting existing SBA loans assigned to new owners? Other details: - Healthcare deal in Florida - Willing to accept the personal guarantee - Loan is at 30 yr fixed 4% interest rate

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

It sounds like you are referring to an EDIL loan. Although technically it is assignable, it is up to the discretion of the SBA on whether or not to approve the assignment. The SBA provided guidance a couple of years ago that stated if the seller is getting proceeds from sale, then they want the EIDL loan paid off as part of the sale. So in essence they are not allowing them to be assigned in normal sales. If the seller is transfering the business in a work-out scenario, then I understand the SBA may approve it, but to be honest I have not seen one get approved yet. Everyone I know that has tried to get one approved with a sale has had the SBA say no. One of the issues you could run into is I understand some of the employee cuts the SBA has made have been to those in the EIDL program, as that program was still pretty staffed up following the pandemic. So it might be hard to reach someone there. On deals where we have needed the SBA assistance to get a subordination done, we have seen the approval times for getting subordination more than double. I hope this helps. Good luck.

Reply by an intermediary
from Harvard University in Dallas, TX, USA

I just went through assuming an EIDL in December/January. They did require a partial paydown of the loan. They were talking an amount equal to 50% of the seller note but we were able to get that down a little. We later asked the SBA to subordinate to a working capital line, something that has been done easily in the past with traditional SBA loans. In our case, they were going to require a paydown of the EIDL equal to 50% of the line of credit, which didn't make sense to pursue so we are self-funding the working capital. Talking with insiders, the SBA, like many government agencies, is a bit chaotic at this point. Also, the SBA lost money last year so they are not as interested in allowing assumptions of money losing, low interest loans. I am not surprised to hear that the agency is becoming tougher on assumptions.

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