Are there any SBA rules regarding the Proof of Funds from Investors?

searcher profile

August 15, 2024

by a searcher from St. John's University in New York, NY, USA

Are there any SBA 7(a) rules regarding the source/proof of funds from investors who will hold less than 19% equity and will not provide a personal guarantee?"

0
12
159
Replies
12
commentor profile
Reply by a lender
from Sam Houston State University in 5324 Community Dr, Houston, TX 77005, USA
Unfortunately, we have to source all of the funds going into the business for equity via bank statements or stock accounts, even if it is coming from minority non-guarantor partners. I had one with over 30 different investors that we had to get bank statements for. Not fun, but part of the process and something the minority partners should know about up front.
commentor profile
Reply by a searcher
from Babson College in Long Island, New York, USA
If minority investors invested into an SPV their own PFS may not matter much but the banks are mostly caring about making sure that none of the funds used as the down payment are sourced from debt, otherwise that debt service will have to be included in the global DSCR calculation, and possible not permitted for the down payment.

Generally these investors have their own means of supporting themselves, so if they're not pulling a salary from the business, then the other aspects of the PFS and personal debt levels are less relevant. But every bank underwriting team is going to have their own rules.

But Raul, Let's chat on Monday!
commentor profile
+10 more replies.
Join the discussion