Does SBA treat asset and stock purchases differently?
Short answer
Both are eligible under 7(a). An asset purchase counts as a change of ownership if you buy all or substantially all of the assets and continue the seller's operations. Without that continuity, the lender may evaluate it as a start-up. Source: SOP 50 10 8.1, App. 15, Para. A.
Both are eligible, and the same Appendix 15 rules apply. Para. A of that appendix, in SOP 50 10 8.1, allows a stock purchase, a stock redemption or an asset purchase.
When an asset purchase is a change of ownership
You must buy all or substantially all of the seller's business assets and continue its operations. If continuity is not clearly defined, the lender may evaluate the deal as a start-up. Start-up rules then apply to equity, eligibility, maturity, underwriting and uses of proceeds.
Who signs differs
- A person buying 100% of the stock: the person and the business are co-borrowers and sign jointly and severally (Para. A.1.a.ii).
- A small business buying 100% of the stock: the acquirer is the borrower. If the target stays a separate entity, both are co-borrowers (Para. A.1.a.i).
- A small business buying assets: the same borrower rule applies (Para. A.1.a.iii).
Valuation scope
The valuation must state whether the deal is an asset or stock purchase and what is included, including any assumed debt (Para. C.1.a).
Buying a division
If tax transcripts cannot isolate the division, the lender must use other third-party verification of the seller's numbers (Section A, Ch. 5, Para. B.3).
Tax and liability effects differ by structure and fall outside SBA's rules. Ask your CPA and attorney.
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