Partner Buyout

Typically, the SBA 7(a) loan is used to structure partner buyouts.

A partner buyout loan typically offers a 10-year term with no prepayment penalty. If real estate is included in the transaction, depending on how the transaction is structured, the term may be longer.

SBA allows for up to 100 percent financing for a partner buyout. We can help determine a buying partner's equity by examining the company's balance sheet.

Sometimes a seller note is part of the financing package on a partner buyout. There are tax advantages to the selling partner to do this. We would typically want seller notes to be structured with a 10-year amortization and a balloon payment no earlier than five years.

If the historic cash flow of the business supports it, payments can begin immediately on the seller note. If there are challenges with the cash flow, we may look for a two-year standby on the seller note.

• Historic revenues and cash flow of the business
• Nature of the business and markets it serves
• Historic roles of both buying and exiting partners in business
• Written business plan and two years of projections with written assumptions to be prepared by the buyer
• Buyer's personal credit score and credit history

A credit decision is usually reached within 10 business days of the submission of the complete loan package.

If approved, the closing process should take 30-45 days.

• Your Business Development Officer will provide you with a preliminary checklist to work on while the credit process is ongoing. To get the closing process off to a good start, the goal is complete as much as possible on the checklist.
• You will be provided with a full closing checklist once your commitment letter is returned by you. We will be prepared to close within five business days after everything on that list has been submitted, reviewed and approved.

We recommend as a best first step that you reach out to your nearest FNB Small Business Finance Business Development Officer who will schedule an initial call with you.