Because the SBA gives favorable lending terms to many US based businesses, it is one of the most common types of financing to be utilized by small and mid-sized business owners. It is also the most common business debt that we see.
There are a few intricacies that make dealing with an SBA loan different than dealing with just about any other type of debt. Because the SBA backs the loan and a lending institution such as a bank actually makes the loan, there are two parties that you must go through in order to successfully restructure or renegotiate the loan.
SBA Hardship or Work-Out
For those business owners undergoing a personal or business hardship, you should start by completing the SBA workout forms.
These forms will be submitted to the SBA for verification and approval. Depending on the size of your loan and severity of your hardship, the SBA may or may not request more information and/or a follow-up meeting to verify the claims that you made.
Depending what the SBA comes back with, you may need to liquidate both business and personal assets in order to service your debt. They also may have the legal right to claw back past compensation that you have paid yourself and/or other executives and owners as well as their immediate families.
Can you sell a business in SBA debt
Yes. There are a few covenants that the sale will need to meet. One of which is; the seller may not have any interest (equity or otherwise) in the acquiring company. This is to safeguard the SBA from borrowers hiding assets in shell corporations that they have interest in and sell them from one of their entities to another are low prices in order to evade paying their debt.
At Minerva Equity, we primarily look to make majority investments or complete acquisitions in successful lower mid-market companies between $1M-$5M. However, we have the ability to acquire businesses that are struggling to service their debt and may face insolvency. If you fit into this situation, please feel free to contact us to see if your business is a fit for our investment. If it is not a fit, we may still be able to refer you to one of several other companies that can help.