Funding a Real Estate Partnership Buyout using SBA 50

Partnership changes are often necessary to unite behind a new long-term vision for a business or to allow individual owners to exit the company to pursue other ventures. However, securing financing for such transitions can be daunting. Fortunately, the Small Business Administration’s 504 loan program offers a lifeline for companies navigating this terrain, providing specific criteria are met.

Whether a business is looking to make ownership changes in which the total transaction, including the real estate, has a financing need greater than $5,000,000 or it involves a smaller financing package for an interest-rate-sensitive business, the SBA 504 is often the best solution for either situation.

If you're considering a change of ownership, you can only use 504 financing for costs tied to owner-occupied real estate and heavy machinery. Any other assets, such as receivables or goodwill, cannot be covered by 504 loan proceeds but can be financed using an SBA 7(a) loan as a companion to the SBA 504. Community Business Finance can guide you on maximizing the available SBA guarantee dollars.

Your application needs to show that the ownership change will create or retain jobs. You'll need to prove that these jobs would be lost without the change, possibly through a statement from the business, a revised business plan, and/or projections.

The SBA recognizes changes in ownership within existing entities as long as the real estate holding company's assets are 1) limited to real estate and/or other long-term fixed assets and 2) when the change of ownership will result in the purchasing owners owning 100% of the holding company.

Sellers may not remain as officers, directors, stockholders, or key employees of the business after the sale.

Consult with Community Business Finance for further details and personalized guidance. With the right support and resources, the journey toward successful partnership ownership change becomes a tangible reality.