In February 2025, we hosted a webinar in conjunction with Acquiring Minds. We discussed financing options for acquisitions, both through SBA lenders and through other forms of financing. We also covered the new possibility of a multi-step partial buyout under SBA guidelines, which allows buyers to use an asset purchase structure while also allowing the seller to roll equity.
Question Timestamps
- 10:03: What can be protected from a personal guarantee, if anything? For example, real estate, retirement accounts, you know we’re already getting those questions. Do we want to address that now or later?
- 12:44: And what about a spouse’s assets? For instance, if the house is in the spouse’s name, what happens?
- 13:05: And James David, was it you who mentioned “community property”? Is that where it applies?
- 14:06: Can I ask a quick question about balloon payments before we move on? Great. This is not an uncommon feature. Let’s take an example: you said amortized at a rate of 10 years, but with a balloon payment in year five. In this case, what do most buyers expect to do in year five? Do they expect to have set aside half the balance to pay off the balloon payment, or do they plan to refinance at that time? Kind of like the real estate game, where you’re perpetually refinancing. What’s the typical approach?
- 15:40: And by the way, “bullet” and “balloon” are used interchangeably, right?
- 18:54: Interesting question here: From the lender’s perspective, is the collateral they want to see for a business correlated at all to my assets? For example, let’s say I’m buying a million-dollar business and the SBA loan is for 800,000. Are they looking for me to have assets equivalent to the loan amount? Or does the government guarantee 75% of that SBA loan? Is there any correlation to my net worth and how tight the underwriting might be?
- 21:56: Here’s a pretty technical question, but an interesting one: If a buyer prepays their SBA loan or seller note, do they have to pay the full interest for the entire amortization period, or just up to the point of prepayment?
- 22:27: And what about the case where you prepay? Prepay versus bullet payment – you’re actually able to pay faster than you had agreed to. Does that change anything?
- 26:39: Can you recommend any lenders who are fully embracing this? James David, do you know of any offhand?
- 29:08: Can you elaborate on that? And specifically, does the personal guarantee (PG) go away if you do that? Is there a loan product that doesn’t have a PG? Is this a new type of loan, or just another SBA loan?
- 30:30: And about the new multi-step rule: Does that mean you can effectively structure earn-outs with SBA loans?
- 34:05: Do you feel like people should go out looking for an $8 million business? No, right? I’ve heard of situations where people didn’t set out to buy a bigger business but found one and then pieced something together, with the help of a pari passu.
- 40:06: Question about the size of the deal and how realistic it might be to secure conventional financing: Jason heard from a loan broker in another webinar that, in reality, traditional commercial loans are likely only available for businesses with 3 million dollars of EBITDA or more, and for businesses smaller than that, they just won’t be interested. That’s where the SBA plays a role. Do you agree?
- 45:26: As always, can you tell us a bit more about yourselves? You mentioned the flat fee structure – maybe elaborate on that a little more and speak to your experience.
- 46:40: And that flat fee is based on the complexity of the deal, right? You have the conversation to understand what will be involved and then estimate accordingly?
- 48:42: Can you explain why the flat fee structure aligns your interests with those of the searcher?
- 49:36: What’s this LOI template, and where can I find it on your website so I can share the link in the chat for everyone?
- 51:26: A couple of people asked about shopping your deal to various lenders and using a loan broker. I’ll selfishly plug a couple of sponsors, but after you share your thoughts, what do you think of using loan brokers to shop the deal and get multiple term sheets?
- 54:21: Do people use legal services for deal structuring? Can you advise on deal structuring and negotiation of terms, or is it mainly just for contracts and legal diligence?
- 55:15: At the start of the webinar, you mentioned that the length of the standby period for a seller note can impact how the seller note counts as an equity injection. Can you elaborate on that?
- 57:57: Can you provide details on life insurance issues, and why some individuals may face more difficulties than others, potentially killing the deal?
- 59:12: Are there ever restrictions with SBA lenders on distributions of earnings in the early years following an acquisition? If so, how often do you see this? What do you know about it?
Webinar Materials
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If you need further assistance or are in the process of negotiating a letter of intent, contact us at info@barlowwilliams.law and we will be happy to discuss your situation.