SPV (special purpose vehicle)

Definition

A company formed to hold one acquisition and nothing else besides it.

Why It Matters

It is how gap equity usually arrives in a self-funded deal. Instead of ten investors on the operating company's cap table, they subscribe to one entity that owns the shares, which keeps the searcher managing one investor relationship instead of ten. It does not hide them from an SBA lender: every direct and indirect owner is recorded and must be a US citizen or national, and an SPV holding 20% or more guarantees the loan itself. It also sets where the waterfall lives and who signs what at closing.

In numbers: Nine investors put $300,000 into an SPV that holds 30% of the buyer's equity; the SPV signs one guarantee, and the SBA lender still records all nine as indirect owners.