SBA guarantee Stock Purchase

January 25, 2022

by a searcher from Miami University of Ohio in Barcelona, Spain

We have negotiated a share purchase with our target, for various reasons.

Due to the fact the target is an LLC partnership we can depreciate the shares as an asset for IRS purposes.

However, our SBA lender is saying that the SBA SOP requires that all shareholders PG the loan in a share purchase.

Is there any way around this to still do a stock purchase? The new entity will have a new EIN which we will be operating under. The previous EIN will only remain for payroll tax purposes.

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Reply by a lender
from Eastern Illinois University in 900 E Diehl Rd, Naperville, IL 60563, USA

I concur with Travis and Robert. We are a commercial loan brokerage shop and the structure you have summarized is a fairly standard structure and we probably close 4 to 6 deals a year under that structure. I have never seen a situation where someone with less than a 20% ownership interest (unless a key employee) has been required to guarantee. It could be your lender is not funding deals PLP and has to submit directly to the SBA, in which case the SBA could have requested more support on another deal they were doing. Purely an assumption on my part, but I think most PLP lenders would not have an issue. Happy to discuss at any time at redacted Thank you.

Reply by a searcher
from Anderson University in Canton, OH, USA

I'm working on a Stock Purchase right now as well and using SBA 7A as the senior debt, and I am the only one personally guaranteeing the debt. In my case, I formed a new LLC that is buying the stock of a C corp and the real estate. The newly formed LLC has several investors but no one owns more than 10% except for me. I talked to several lenders in my process, none of whom argued for PG's from other investors. Perhaps there is some other nuance in your deal that is triggering the request, but I wouldn't think the stock purchase alone would cause the issue. It may be worth talking to another lender or pushing back with your current lender.

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