Partial change of ownership

Definition

An SBA buyout where a selling owner keeps part of the stake after closing.

Why It Matters

It is the only way a seller keeps equity beside an SBA loan, because a seller who sells outright may not stay a stockholder. At least one original owner stays and personally guarantees the loan, and a selling owner left under 20% still guarantees all of it for at least two years after the last disbursement. Every new owner signs as a co-borrower whatever the percentage. A buyer who has not worked in the business for 24 months and ends up with half or more is underwritten as a newcomer: the outright purchase's injection, coverage floor and quality of earnings line all apply. The seller may still stay on as an owner and an employee.

In numbers: A searcher buys 85% of a $4.5M business and the founder keeps 15%. The founder guarantees the whole loan for at least two years, and the searcher, new and above half, is held to the 10% injection and the 1.25 coverage floor of an outright purchase.