Institutional funding and SBA lending

intermediary profile

September 02, 2022

by an intermediary in New York, NY, USA

Hi does anyone know how to navigate SBA funding while having institutional investor(s) contribute part of equity funding?
If anyone has done this before, would be great to hear about the experience.

Thanks

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commentor profile
Reply by a lender
from Eastern Illinois University in 900 E Diehl Rd, Naperville, IL 60563, USA
I would be more than happy to have a discussion about it. You can reach me directly at redacted For SBA, anyone who has a 20% or greater ownership interest is required to guarantee the loan. However, anyone with under a 20% ownership is not required to guarantee the loan. The amount of equity coming into the transaction does not need to match the ownership interest in the operating company. Someone can bring 50% of the equity but only have a 10% ownership interest. Happy to discuss in more detail at any time.
commentor profile
Reply by an investor
from University of California, Berkeley in San Francisco Bay Area, CA, USA
The issue is the personal guarantee the SBA requires from everyone owning more than 20%. Institutional investors need control rights and typically want to own more than 20%, however they will not sign a personal guarantee. That’s why SBA debt does not work for traditional search and most independent sponsor deals.
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