Best Practices: SBA Standby Agreements and Other Considerations with Seller Financing
In change of ownership transactions, Sellers may agree to finance a portion of the purchase price through the use of a promissory note (“Seller Note”). Seller financing reduces the amount of the bank financing and thus reduces the risk to the Lender. A Seller Note also allows Borrower to retain greater liquidity and pay less ... Read More
Best Practices: Considerations for SBA Lenders Following Recent Market Changes
The financial markets over the past year and half have been nothing short of volatile. Throughout 2022 and continuing into the first quarter of 2023, the Federal Reserve has been focused on controlling inflation by consistently and continuously increasing interest rates. In the past two weeks, the banking system has seen its own turmoil following ... Read More
Best Practices: Business Licenses
Prior to disbursement of Loan proceeds of an SBA 7(a) loan, all SBA lenders must obtain certain due diligence information from the small business applicant to comply with the terms and conditions of the SBA Loan Authorization. SBA requires lenders to obtain evidence that the Borrower and Operating Company have the requisite licenses, permits and ... Read More
Best Practices: Financial Information Verification
On March 1, 2023, SBA issued SBA Procedural Notice 5000-844866, Extension of Guidance for Revisions to SOP 50 10 6 Financial Information Verification Procedures to Allow for the Use of IRS Forms 4506-C or 8821 for 7(a) and 504 Loans, which extends the guidance provided under SBA Procedural Notice 5000-829416 until March 1, 2024. These ... Read More
Best Practices: Bulk Sales and Successor Liability Laws
Buying a business is an exciting time and allows the new business owner to look forward to all of the great things that they hope to accomplish. In most cases, a buyer is not liable for the unpaid taxes of the seller unless the buyer expressly agrees to assume them. However, some states have enacted ... Read More
Best Practices: Proceed with Caution – Consulting Agreements
Financing a business acquisition is an eligible use of SBA 7(a) loan proceeds, provided, that certain conditions are met. One of those conditions is that a seller is required to divest his/her interests completely from the business to be sold (with the specific exceptions regarding loans to purchase an employee stock ownership plan (ESOP) or ... Read More
