# SBA Update for Business Acquisition Loans

- Link: https://johnmorelli.us/sba-update-for-business-acquisitions/
- Published: 2023-12-08T19:32:22+00:00
- Author: John Morelli

## Latest SBA Procedural Notice to benefit some business acquisition financings.

On December 6, 2023 the Small Business Administration (SBA) issued a Procedural 
Notice (Procedural Notice 5000-852522 ) clarifying and simplifying certain requirements
for Borrowers
operating in leased space, equity requirements for complete partner
buyouts and partial changesof ownership, and 7(a) loan maturities for complete changes
of ownership. This Notice alsoclarifies provisions related to the use of 7(a) loan
proceeds to refinance same institution debt.

### Key Points:

 * **Leased space:** Lenders must obtain lease agreements and may require landlord
   waivers when a substantial portion of loan proceeds are used for leasehold improvements
   or collateral includes leased assets.
 * **Ownership changes:** For complete partner buyouts and partial changes of ownership,
   borrowers can meet minimum equity requirements through various methods, including
   cash contributions or debt-to-worth ratios.
 * **Refinancing:** 7(a) loans cannot be used to refinance existing same institution
   debt, unless the project size increases due to additional funds for other uses.
 * **Loan maturity:** For complete ownership changes, the maximum maturity is 25
   years if the purchase price includes commercial real estate valued at 51% or 
   more. Otherwise, a blended maturity can be calculated based on the assets included
   in the purchase price.

### Additional Notes:

 * Existing SOP guidance regarding 504 loans and loan maturity for partner buyouts
   or partial ownership changes remains unchanged.

### Our Take:

 * SBA no longer requires that a lease term must be => loan term if the loan proceeds
   are not financing a substantial amount of leasehold improvements or the collateral
   consists of a substantial portion of leasehold improvements, fixtures, machinery
   or equipment that is attached to the leased space. If loan proceeds are financing
   a substantial amount of leasehold improvements, then the lender must obtain a
   written copy of the lease agreement and if unable to obtain an assignment lease
   or landlord’s waiver then the lease term must be at least as long as the SBA 
   loan term and any renewal options must be exercisable only by the borrower.
 * For a complete change of ownership with commercial real estate, the lender can
   now blend the maturity if the value of the CRE is less than 51% of the purchase
   price.

 

A complete copy of Procedural Notice 5000-852522 can be viewed [here](https://sba.app.box.com/s/pf2wnrwxvpdyfui7q85nive1gs7nggwv)

For additional information on how these changes may benefit an SBA borrower, please
get in touch with us [here](https://insigniafs.com/contact/) or call 800-616-2050.