Equity Rollover with SBA 7(a) Loan - Asset Sale?

June 07, 2025

by a searcher in New York, NY, USA

Hi - I am looking at a $2M TEV SMB business and want a 10% management equity rollover. Are these limited to just stock sales or an asset sale as well? A stock sale is a non-starter for me as I don't want to be responsible for the legacy business' liabilities (unless there is a work around there). The seller is open to this and we are closing in on a structure that is 10% rollover equity and 15% seller note on top of that, for context. If a stock sale isn't possible, any tips on how to align incentives on a go-forward basis?

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

With the updated SBA rules, you can only do a partial business acquisition as a stock sale or membership interest purchase and not as an asset sale. The seller retaining equity (assuming he is getting paid out on other ownership at closing) is required to sign a full guarantee on the debt for two years (which is extended if the loan has not been current for 12 months at the end of two years). So you are going to run into two issues, The first is the fact the seller would need to guarantee the debt and the second being you have to do it as a stock purchase. The updated SBA rules are very restrictive in this way. I would be happy to get on a call to discuss what you are trying to do and see if we can provide any other options. You can reach me here or directly at redacted

Reply by a professional
from Northwestern University in Chicago, IL, USA

I’m happy to offer some insights and chat more. You can reach me at redacted

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