Future of SMB investing

May 14, 2023

by a searcher from Louisiana State University Health Sciences Center New Orleans in New Orleans, LA, USA

How does SMB investing change now with the new SBA changes with potentially less equity injection? Less opportunities? Only big deals needing equity investment? Not as favorable terms for the investor?

Thoughts?

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

We are still in the process of assessing the changes and reviewing the additional guidance being produced. I think at this moment the two biggest take-aways is that you can do a partial business acquisition now. But doing the partial business acquisition requires you to buy into the existing company versus doing an asset purchase with roll-over equity from the seller. Also, you can get away with as little as 2.5% down with a seller note on standby for 2-years (no longer needs to be on standby for 10 years) based on the SBA rules. However, we will have to see if lenders allow deals to get done with only 2.5% equity. Historically you could do as little as 5% equity, but many lenders would not go that low or would only do so in certain circumstances.

Keep in mind none of this goes into effect until August 1st, and changes could happen prior to that date.

More to follow with a post in the next few days. Good luck with your search. For questions you can reach me at redacted

Reply by a professional
from Clemson University in Spartanburg, SC, USA

I think there will be more opportunities for SMB investors. You have to think, some deals will not meet the SBA criteria. You're also going to have other deals where buyers do not want to have to disclose all of those documents that the SBA will want to see. In the grand scheme of things I do not think that the SBA's new rule changes will affect investors.

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