Ever wonder how SBA 7(a) loan projects come together behind the scenes? In this new series, we'll break down real-life case studies - highlighting sources and uses of funds, deal structures, loan terms and business valuations that bring each project to life.
Let's take a look at a case study on a Complete Change of Ownership:
- $751,700 SBA Term Loan - 25 year term; 5 year change period
- Companion loan - $100,000 SBA Express LOC for WC
- 7(a) Sources and Uses:
*This project was completed prior to SOP 50 10 8 where a 'service fee' was allowed. It should be noted that the fee should now be labeled 'packaging fee' to be SBA-eligible.
Lender Considerations - Change of Ownership:
- How structured? Asset Purchase; CRE & Equipment
- Obtain executed Purchase Agreement with breakdown of assets
- Term of Loan - for complete change of ownership:
- Up to 25 years if acquisition includes Commercial Real Estate where business operates and appraised value of CRE is 51% or more of purchase price. (65.88% in this example)
- Business Valuation
- Lender had option to complete internal valuation as amount financed less RE & Equip. <$250M - chose external due to internal policies & procedures.
- Equity Injection - minimum 10% of total project costs
If you have any questions or would like to learn more about how our Lender Services Team can help you navigate through your 7(a) projects, contact us at LenderServices@wbd.org.
