SBA rules · SOP 50 10 8.1

Can an SBA loan finance a financial advisor's practice?

An SBA 7(a) loan can finance a financial advisor or wealth management practice provided the firm operates on a fee basis and does not use loan proceeds to invest in its own portfolio of investments.

Quoted from SBA SOP 50 10 8.1Every quote checked word for word

In detail

Fee-based practice eligibility: A business engaged in providing financial advisor services on a fee basis is eligible, but it cannot use loan proceeds to invest in its own portfolio of investments. Investment companies, firms primarily engaged in investment, and businesses dealing in stocks, bonds, commodity futures, and other financial instruments are ineligible.
7(a) practice acquisitions and client lists: An SBA 7(a) loan may finance a change of ownership of a practice, including intangible assets such as goodwill and client or customer lists, as long as the financial due diligence requirements are met.
504 program restriction on acquisitions: A 504 loan can only finance eligible long-term fixed assets; it cannot finance intangible assets, customer lists, or goodwill in a change of ownership, though those non-fixed assets may be financed by other means, including a 7(a) loan.

The source

What the SOP says

“A business engaged in providing the services of a financial advisor on a fee basis is eligible, provided they do not use loan proceeds to invest in their own portfolio of investments.

SOP 50 10 8.1, Chapter 1: Primary Applicant Eligibility Requirements > Certain businesses engaged in lending may be eligible under limited circumstances: (lines 400-405)✓ Verified

“Investment Companies;

SOP 50 10 8.1, Chapter 1: Primary Applicant Eligibility Requirements > Types of Ineligible Businesses (lines 388-399)✓ Verified

“Dealing in stocks, bonds, commodity futures, and other financial instruments;

SOP 50 10 8.1, Chapter 1: Primary Applicant Eligibility Requirements > Speculative businesses include: (lines 516-521)✓ Verified

“A 7(a) loan may be used to finance a change of ownership that includes intangible assets (including, but not limited to, goodwill, client/customer lists, patents, copyrights, trademarks, intellectual property, and agreements not to compete) as long as the financial due diligence requirements set forth in Paragraph C.1 of this Appendix are met.

SOP 50 10 8.1, Appendix 15: 7(a) Changes of Ownership > Intangible Assets (lines 5046-5047)✓ Verified

“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;

SOP 50 10 8.1, Chapter 1: Eligibility through Submission of Application > Change of Ownership (lines 3342-3353)✓ Verified

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