New Partners requiring PG & Collateral

searcher profile

June 18, 2024

by a searcher in Illinois, USA

Hello,

We are self funded searcher and closing on a deal using SBA. We have plans to add new partners post acquisition, in order to spread risk equally, we are proposing that if we add new partner, they would have to provide PG and Collateral even though if SBA doesn't have such requirement.

Has anybody else done something similar ?

thank you in advance.

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commentor profile
Reply by a lender
from Eastern Illinois University in 900 E Diehl Rd, Naperville, IL 60563, USA
If you use SBA financing and you do a change of ownership after closing or acquisition, technically you are supposed to get that approved by the lender and the SBA. If any new owner has a 20% or greater ownership interest, the lender is likely going to require them to guarantee the loan.
commentor profile
Reply by an intermediary
in New York, NY, USA
I echo Jeff's comment about why any investor would agree to this. Investors are typically only willing to put their investment at risk, not their entire personal balance sheet.
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