HVAC / plumbing / electrical operators with licenses?

March 02, 2023

by a searcher from University of Virginia-Darden - Darden School of Business in Bethesda, MD, USA

I'm looking at HVAC / plumbing / electrical companies in the DC / MD / VA area and using a SBA 7a loan for the purchase.

7a loans follow state regulation that require at least one person (aside from the former owner who's retiring) in the business to have a state license for their respective trade. Makes sense.and not arguing that - but does anyone have advice on finding someone with a license? Am I trying to 'hire' them before I acquire the business, bring them in earlier as an equity partner, or something else entirely?

A bit open ended, but any advice would be appreciated!

Thx!

Reply by a professional
from Villanova University in West Chester, PA, USA

Hi ^redacted‌, I just worked on some deals like this. Key man employment agreements with succession planning are an option to address this situation. This is often required in licensed businesses. Sometimes, all owners must be licensed. So, you just want to dial into the specific state law on this for each industry you're looking at to know the requirements and adjust the plan accordingly. For ^redacted‌'s idea, this could be a SAFE - simple agreement for future equity if that's the route you go. I'd be happy to discuss this further.

Reply by a searcher
from Indiana University, Bloomington/Indianapolis in Houston, TX, USA

We’re working on a deal right now involving licensed trades. It appears the SBA now allows the seller to be part of the business indefinitely as a partial equity holder and you can use the sellers license for a period of time until you can transition it to you, another officer or an employee. However, you will need to a) do the deal as a stock purchase, and b) have a defensible plan to get a license holder in the business so you can eventually buy the remaining shares from the seller.

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