Path to retaining a minority owner beyond 1 year with SBA?

January 06, 2023
by a searcher from University of Oxford in Bainbridge Island, WA, USA
Based on my understanding of SBA financing, previous owners can only work at the company for up to 1 year post acquisition. I'm looking at a business now where there's a key employee who has ~3% ownership of the company (due to some incentive comp plan). Does anyone know if there are any common/acceptable routes to keeping an owner with such a small % ownership on beyond the 1 year mark post-acquisition when using SBA? Thanks!
from Eastern Illinois University in 900 E Diehl Rd, Naperville, IL 60563, USA
So your options are to have the seller buyout the majority partner in advance. For you to buy both out at closing. There is a possibility due to the non-controlling ownership interest a lender would allow them to stay on beyond one year. Happy to discuss this.
Also happy to discuss how the rules work for the one-year employment contract. I can be reached here or at redacted if you would like to discus.s.
from Boise State University in 800 W Main St, Boise, ID 83702, USA