SBA Loan Guidelines Changes - Update June, 2023

Keeping up-to-date with SBA loan guideline changes.

Funding partial ownership

Currently 7(a) loan proceeds are not permitted to be used to purchase a portion of a business or of another owner’s partial interest in a business. SBA has revised this regulation to allow 7(a) funding of both partial and full changes in ownership.

Changes of ownership

At a minimum, SBA requires an equity injection of at least 10% of the total project costs required to complete the change of ownership.

Seller debt is not considered as part of the equity injection unless it is either on full standby* for the first 24 months of the 7a loan, or it is on partial standby* and there is historical business cash flow available to make the payments and at least 25% is form a source other than the seller.

*Full standby are when there are no payments of interest or principal. Partial standby is when interest-only payment have been made.

When an existing business acquires a business that is in the same 6 digit NAICS code with identical ownership and in the same geographic area as the acquiring entity, SBA considers this to be a business expansion, and SBA will not require a minimum equity injection.