Buy-Side Fees/SBA Loans

March 15, 2023

by a searcher from George Washington University in New York, NY, USA

Hello, I'm evaluating a platform that charges a buy-side fee if we close a deal that they sourced.

Does anyone know if you can roll up the buy-side success fee into an SBA loan as part of "closing fees"?

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Reply by an investor
from University of California, Berkeley in San Francisco Bay Area, CA, USA

I believe some folks on this forum who help self-funded searchers (SIG?) charge fees in return for helping searchers with templates and equity raises. I have invested in SBA deals that included such fees. So, it appears to be possible. I looked into this myself a couple of years ago an learned that there is significant compliance risk related to broker-dealer licensing rules.. A grey are at best and possibly illegal if not structured cleanly, so would definitely recommend talking to a lawyer before doing this.

Reply by an intermediary
from Southern Methodist University in Dallas, TX, USA

Thomas, BD licensing is not longer required for smaller deals (less than $250M in rev or $25M in EBITDA on transactions for more then a 20% of the equity) at a federal level, but the rules still apply on a state by state basis where some states require RE licenses.

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