By: Andrew Kennedy –Senior Loan Officer – Live Oak Bank

The Small Business Administration recently issued a new procedural notice1 offering significant benefits for small business owners seeking an SBA loan. The changes open the door to:

  1. Asset sales for partial changes of ownership acquisitions.
  2. Blended term for partial change of ownership or partner buyouts.
  3. The ability to refinance Merchant Cash Advance debt.
  4. No title requirement for vehicles under $10,000.

Here’s what you need to know about these exciting changes:

 Asset Sales for Partial Changes of Ownership or Partner Buyouts

The updates enable asset sales for partial changes of ownership acquisitions in the SBA 7(a) loan program. This is great news for both buyers and sellers of small businesses.

Here’s why this is a significant development:

  • Reduced Liability: Asset sales allow buyers to acquire specific assets without taking on the liabilities of the seller’s previous business. This provides a cleaner, more manageable transition with fewer potential risks.
  • Tax Advantages: In many cases, asset purchases can lead to better tax treatment. Buyers can typically depreciate the acquired assets, leading to potential tax savings that improve the bottom line.2
  • Access to SBA Financing: With the new procedural notice, the SBA is making it easier for buyers to leverage SBA financing for asset purchases.

This opens new opportunities for buyers who want to acquire businesses without the complex liabilities tied to stock purchases. For sellers, it provides a clear, structured path to exit while maximizing value.

Blended Term for Partial Change of Ownership or Partner Buyouts

Previously, SBA loans for partial change of ownership were limited to a 10-year term, even if commercial real estate was part of the purchase. Now, the term can be blended based on the underlying assets being purchased, providing more flexibility and potentially better terms for your business needs.

No Title Requirement for Vehicles Under $10,000

Another positive change is that lenders no longer need to take title on vehicles valued under $10,000. This simplifies the process and reduces the paperwork for our customers, making securing the financing you need easier.

 Refinancing MCA Debt

For businesses struggling with Merchant Cash Advance debt, this move will open doors to refinancing options, providing businesses with the chance to alleviate financial pressure and regain stability.

MCAs have been a convenient source of quick capital for many small businesses. However, the high interest rates and rapid repayment schedules can often put businesses in a cycle of debt, making it difficult to maintain healthy cash flow. The SBA’s new procedural notice provides a pathway to refinance MCA debt using SBA-backed loans, offering substantial benefits to business owners:

  • Lower Interest Rates: One of the most significant advantages of refinancing MCA debt through SBA loans is access to lower interest rates. SBA-backed loans typically offer more favorable rates than traditional MCAs, reducing the cost of borrowing and easing the financial burden on small businesses.
  • Extended Repayment Terms: Unlike MCAs, which require daily or weekly payments based on sales, SBA loans offer more flexible repayment terms, often extending over several years. This can lead to lower monthly payments, allowing businesses to maintain cash flow and avoid the stress of frequent, high-cost repayments.
  • Improved Cash Flow: By refinancing, businesses can free up cash that would otherwise be tied up in expensive MCA repayments. This additional liquidity can be reinvested into operations, used to hire more staff, expand inventory, or simply improve day-to-day operations.

How Can You Take Advantage of This Opportunity?

Don’t miss out on this important update! If you’re thinking about refinancing MCA debt or acquiring or selling a business, now is a good time. Navigating the SBA process may seem daunting, but with the guidance of an SBA loan expert, it can be a smooth and rewarding experience.

Visit liveoakbank.com to learn more about SBA lending.

  1. SBA Update Effective December 6, 2024.
  2. Live Oak Bank does not provide tax advice. This material is for informational purposes only. Please consult your tax, legal and/or financial advisor before engaging in any transaction.

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