If two searchers partner on a deal, how is the SBA loan assigned?

September 07, 2024

by a searcher from North Carolina State University in Raleigh, NC, USA

Scenario:
- Two searchers partner on a deal, let's say 50% equity each.

Hypothetically, the searchers close on a deal and the SBA loan is $2MM.
- Both are now PG'ing the SBA loan.
- However, one of the searchers wants to maintain their full SBA loan allowance ($5mm).

Questions:
1.) Would 50% of the $2MM be assigned to each of the searchers? (e.g. $1MM to searcher 1, and $1MM to searcher 2)
2.) Can one searcher take the full $2MM SBA loan allowing the other searcher to not exhaust their SBA limit? (e.g. $2MM to searcher 1, and $0MM to searcher 2)

Reply by an investor
from University of Pennsylvania in New York, NY, USA

Roger is correct. One way to approach this is to keep one partners equity allocation under 20% on each deal and switch who is taking the other 80% on each deal. That way only one partner gets hit with the full guarantee and between the two of you can have $10M total personal guarantee. Haven't done it myself but I know people who have. Please message me and I can refer one of them.

Reply by an intermediary
from The University of Chicago in Chicago, IL, USA

TMK, each will have $3 M availability for next acquisition if it is in the same industry. However, each will have $5 M availability for new industry.

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