The SBA Overturned the "One Strike You're Out" Policy

Today, the SBA overturned the "One Strike You're Out" policy for minority investors, clarifying that they can issue waivers for prior losses. Previously, if you invested even $1 as a non-controlling, minority owner of an SBA-backed deal and that deal defaulted, you would be barred from all SBA-backed transactions. Now, the SBA has clarified that it can give waivers to minority, non-controlling investors who have had a prior loss. This preserves the capital market for investing in American small businesses. To be considered for a waiver, you must: 1) Have owned less than 20% of the entity that defaulted 2) Not be a guarantor or co-borrower on the defaulted loan 3) Not have had control over the business that defaulted Once those criteria are met, the SBA will evaluate the situation based on factors listed in the document. This is in line with what the SBA expressed during our meeting with them, and it is very encouraging to see that what could have been a show-stopper for a significant portion of the American small-business economy is being addressed.