SBA 7a Loan : adding member retroactively

by a searcher

4 months ago

Hello,

We acquired a business using have SBA 7 am loan last year. We would like to add a member retroactively to the entity and offer him 15% equity from year###-###-#### We plan to add him to entity by amending the articles of incorporation. 

I am curious if this something needs to be reported to lender as well as SBA ? and are their any legal issues or would IRS flag it ?

Thanks in advance.

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searcher from Rutgers-The State University of New Jersey-Camden - Rutgers School of Business

I had this conversation for one of my SBA loans. My lender said as long as you're transferring less than 20% of ownership, there's no issue from them, but they do need to review the equity agreement and the revised operating agreement for the LLC. Anything 20% or more would be quite complicated, as that would essentially be a loan modification with a new personal guarantor. This was more than 12 months into our loan term so I can't speak to the 12 month SBA notification requirement that others mentioned.

4 months ago | like reply | 0 likes

intermediary from The University of Chicago - Booth School of Business

It is my understanding that SBA APPROVAL is required if there is ownership change during the first 12 months. Not required afterwards.
I do not know what happens if the company issues new shares for consideration. ^Searchfunder member‌ answer addresses this.‌

4 months ago | like reply | 0 likes

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