Which SBA lenders allow convertible debt?

investor profile

February 24, 2021

by an investor from University of California, Berkeley - Haas School of Business in San Francisco Bay Area, CA, USA

I'm an investor interested in making an investment in a self-funded search deal using convertible debt. The debt would be convertible to 40% of the equity only after the SBA loan is due.

I researched this extensively and found that SBA SOPs allow excluding convertible debt shares from the fully diluted cap table for PG purposes if exercise or conversion is extremely remote. This condition would be met assuming conversion is only possibly after the SBA loan is paid off.

However, some SBA lenders are telling me upfront that convertible debt doesn't work for them, likely because the bank reps don't understand the nuances of the rules.

Can anyone recommend a SBA lenders who have done this before and will allow it?

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Reply by an investor
from University of Wollongong in Sydney NSW, Australia
If the lenders are able to provide business loans between $1m - $10m, for an established business, based on receivables, property, machinery, please let me know.

Also, if you can provide loans for eCommerce businesses, based in revenue, please let me know.

We are looking for acquisitions in these industries.
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Reply by a lender
from California State University, Sacramento in Seattle, WA, USA
Please DM at redacted I’d like to know more of the specifics of your ideas but there could be an acceptable structure that might be eligible.
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