Bringing on an Operations Partner in an SBA Deal, What Should I Know?

June 23, 2025

by a searcher from Carnegie Mellon University in Denver, CO, USA

I’m currently evaluating a new business and bringing in a partner who has industry experience. I believe their expertise will be an asset, so the plan is for them to co-own and operate the business with me. They’ll step into the CEO role in a more customer/client facing role, and I’ll take the role of President focused in operations. I’m proposing a 51/49 ownership split, with me holding the majority share. The business does $500k SDE with a huge potential for growth. I’d love to hear from others who’ve gone through SBA deals with a partner. What should I be watching out for when there are two owners involved? A few questions I’m working through: Do we each need to have our own legal counsel to protect our individual interests? Should one of these lawyers help with the acquisition deal or is that a 3rd lawyer we need? How does SBA financing typically work when there are two buyers? Should we create an LLC for the two of us before approaching the bank and moving forward with the acquisition? Open to any advice or experiences others are willing to share.

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

I can help address a few of the questions from a financing perspective. First off, you do not need to crate your LLC in advance. You can wait to create it. As for financing, if you both will own 20% or more of the business you will both required to sign a personal guarantee. In addition, if either of you have personal assets like 25% or more equity in a home or fully owned investment property and there is a collateral shortfall on the purchase, you would be required to pledge those assets as additional collateral. The biggest issue you could run into from a financing perspective is meeting the minimum personal cash flow requirements on an SBA 7A loan. The lender must factor in a sufficient draw from any guarantors, unless they will maintain outside income, to cover their living expenses. If you will both operate the business full-time, then you will either need to have sufficient income from other sources or be able to take adequate draws from the business to support your living expenses and the debt service. You can use spousal income to help support living expenses, but lenders will only allow that if your spouse is a guarantor as well. I would be happy to get on a call to discuss financing options and how the SBA handles partner deals. We also off a free review on deals and can give you guidance from that standpoint on the specific deal. You can reach me here or directly at redacted Good luck.

Reply by a lender
from University of Southern California in Los Angeles, CA, USA

Hi Anonymous - We are building America's best SBA loan brokerage and would be happy to help you and your partner with the deal. Do we each need to have our own legal counsel to protect our individual interests? - This is going to depend on how much you trust this partner. I think having one lawyer works that can set up the entity with the business practices in mind. Might be helpful to have some type of recourse if the business partnership does not end up working out. The SBA does not allow equity vesting but the operating agreement can stipulate future equity purchase/valuation multiples. Should one of these lawyers help with the acquisition deal or is that a 3rd lawyer we need? - Yes, the same lawyer can help write up your purchase agreement with the seller. How does SBA financing typically work when there are two buyers? - Each buyer provides a personal guarantee on the loan. Both partners guarantee and supply their share of the 10% equity needed for the loan. The bank have to underwrite a reasonable salary for both business owners that cover each of your personal expenses. A good rule of thumb would be annualizing each of your compulsory expenses (rent, mortgage, student loans, car loans etc) and multiplying those by 1.5x to 2x. Should we create an LLC for the two of us before approaching the bank and moving forward with the acquisition? - You do not need to create a LLC till after you have a deal under LOI and have a bank willing to finance the deal. Once the LLC is created you can apply the prepaid expenses incurred in your search as deductions when you file taxes. So keep good records. We would love to help you find the right SBA lender for this deal. We work with all the major SBA lenders. The bank pay us after your loan closes, so this is a 100% free service for you. Please click here to schedule a meeting with us: https://cal.com/team/sba/intromeeting

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