SBA released SOPredactedlast Friday, August 14, and I’ve been digging into the changes over the past few days. I wanted to see whether anyone in the SearchFunder community is already organizing a broader response, petition, or other effort around some of the changes to acquisition financing. I’m several months into a self-funded search, and a few of these changes seem like they could have a pretty significant impact on the search community: * Outside investors / equity injection: This seems to largely eliminate the ability of searchers to rely on outside investors to fund the required equity injection without bringing in investors who must personally guarantee the SBA loan. In practical terms, a searcher may now need to personally fund at least 5% of the total project cost, and potentially more depending on the structure. For searchers without substantial personal liquidity, that could dramatically reduce the size of business they can acquire or prevent them from completing an acquisition altogether. * Seller rollover: The new rules also appear to eliminate one of the more attractive succession structures for a self-funded searcher: acquiring control of a business while allowing the seller to retain minority ownership. This was useful not only because it reduced the amount that needed to be financed at closing, but because it kept the seller invested in the success of the business and created a natural incentive to help the new owner through the transition. Under the new rules, an outside buyer who wants control appears to generally need to acquire 100%. * Very short implementation period: These are significant changes to how searchers can finance and structure acquisitions, yet the SOP was released on August 14 and becomes effective October 1. That gives the community only about six weeks to adjust. A search commonly takes around two years, and many searchers have spent months building lender and investor relationships and developing an acquisition strategy around the existing rules. Changing that framework with only weeks to adjust seems particularly difficult for people already well into a search or transaction. * Mandatory QoE at $3M+: I’m supportive of strong diligence and would likely obtain a QoE on a deal of this size anyway. My concern is potentially having to pay for duplicative work if a buyer obtains a high-quality independent QoE but the lender is then required to commission its own. That adds cost and time to transactions that are already expensive for individual buyers. * Real-estate-heavy acquisitions: The changes to amortization also appear likely to make manufacturing and other asset-intensive businesses harder for searchers to acquire. If only the real estate portion receives the longer amortization while the business portion has to amortize over 10 years, annual debt service increases and otherwise healthy businesses may no longer cash flow sufficiently to support an acquisition. I’m not advocating for weaker underwriting standards or trying to find ways around putting meaningful equity into a transaction. My concern is that some of these changes may have unintended consequences that make it substantially harder for qualified individual buyers to acquire small businesses, while also eliminating structures that can reduce leverage and keep sellers invested in a successful transition. Before trying to do anything individually, I wanted to see whether anyone is already organizing around this or considering a petition or broader industry response. @redacted‌ - Are you aware of an organized effort already underway? Is SearchFunder considering organizing a petition or other response? And, since I’m not a lender or an expert in this stuff, I would welcome any feedback on whether I am interpreting these changes correctly.