SBA SOP 50 10 8, C.Ch1.C.13 — Change of Ownership

SOP 50 10 8 C.Ch1.C.13

Effective 2025-06-01 · publisher's stamp for this provision

13. Change of Ownership Projects that result in a change of ownership are eligible under the following circumstances: i. The 504 Project finances only the costs associated with eligible long-term fixed assets; the acquisition of any other assets such as receivables or goodwill is not an eligible use of 504 loan proceeds or Third Party Loan proceeds and must be financed by other means, which may include a 7(a) loan; ii. The application documents that jobs will be created or retained because of the change of ownership. The application must demonstrate that there is a reasonable basis upon which to conclude that the retained jobs would be lost without the change of ownership. This can be in the form of a statement from the seller to that effect with supporting facts or other certification acceptable to the SLPC. iii. Loan proceeds may be used to finance a change of ownership between existing owners in an existing EPC when the asset(s) of the EPC are limited to real estate and/or other eligible long-term fixed assets that the EPC leases to one or more Operating Companies (“OC”) for conducting the OC’s business and when the change of ownership will result in the purchasing owner(s) owning 100% of the EPC. SBA recognizes that an EPC’s balance sheet may include limited assets in addition to the real estate or other eligible long-term fixed assets, such as capital replacement reserves or escrow accounts for taxes and/or insurance (such assets are ineligible assets). In such case, 504 loan proceeds may be used to finance a change of ownership between existing owners of the EPC as long as: a) The ineligible assets are directly related to the real estate or other eligible long-term fixed assets; b) The amount attributable to such ineligible assets is de minimis; and c) The ineligible assets are excluded from the Project financing. See Section A, Ch. 2, Para. A, Eligible Passive Companies for more information on EPC/OC requirements. The 504 loan proceeds must not be used to purchase stock or any other ownership interest in a business unless, by purchasing the stock or other ownership interest, the Applicant is purchasing the real estate where the Applicant is located and/or other eligible long-term fixed assets used in the Applicant’s business operation. To the extent the value of the stock or other ownership interest exceeds the value of the real estate and/or other eligible long-term fixed assets (“excess value”): i. The excess value cannot be financed by the Project financing; it must be financed separately; and ii. The excess value must be de minimis compared to the value of the real estate and/or other eligible long-term fixed asset(s). The change of ownership must result in the Applicant owning 100% of the business. The seller may not remain as an officer, director, stockholder or Key Employee of the business. All other 504 Loan Program Requirements must be met.

Source: SBA SOP 50 10 8, C.Ch1.C.13 — Change of Ownership · source URL · snapshot 535743ffe062cc34