Can a new holding company be used in an SBA partial buyout?
Short answer
Not in a multi-step structure. SOP 50 10 8.1 bars a partial change of ownership in which existing owners form a new entity to bring in a new owner. That entity would become the 100% owner of the operating company. Source: App. 15, Para. A.1.c.ii.
Not if the new company is how the new owner comes in. SOP 50 10 8.1, Appendix 15, Para. A.1.c.ii, says multi-step partial changes of ownership are not eligible.
What SBA defines as multi-step
Some or all of the existing owners bring on a new owner by forming a new entity. That entity becomes the 100% owner of the operating company. Some or all of the existing owners and the new owner then own the new entity.
Holding companies are not banned outright
The same paragraph refers to transactions involving holding companies. All individuals gaining equity in such a deal must be co-borrowers. Indirect owners must also personally guarantee the loan. Ownership held through a holding company counts with direct ownership when testing the 50% limit (Para. A.1.c).
The SOP gives no examples of holding company structures that are allowed. Have your lender confirm the structure before you form anything.
Ownership still has to be fully disclosed
The lender must list 100% of the direct and indirect ownership of the applicant in the SBA Loan System (Appendix 20, Para. A). All entity owners must be organized in the United States, its territories or possessions (Section A, Ch. 1, Para. F).
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