The podcast episode discusses recent changes in Small Business Administration (SBA) financing guidelines. Some key changes include the allowance of partial ownership changes, where sellers can sell a portion of their equity while retaining a stake in the business. Previously, a complete change of ownership was required.
The changes took effect on May 11, 2023, with additional significant changes scheduled for August 1, 2023. Another change is the reduction in the duration sellers need to stay with the company after selling it. Previously, the maximum period was 12 months, but now sellers can stay on for as long as they desire.
The new rules also impact seller contributions toward the down payment. Previously, sellers could leave up to five percent on standby for the loan term. However, the changes reduce the standby period to two years. Additionally, the personal liquidity rules have been revised.
The changes have both benefits and concerns for lenders. Introducing zero money down options raises concerns about potential defaults and increased risk for lenders. Congress has also expressed concerns about the new rules and the associated risks.
The episode suggests that business owners, buyers, and brokers should stay informed about the changes and work closely with knowledgeable professionals who can help navigate the new SBA loan rules.
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