SBA rules · SOP 50 10 8.1

Can an SBA loan be used for a stock purchase or an asset purchase?

Yes, SBA 7(a) loan proceeds can be used to finance a change of ownership through either a stock purchase (including a stock redemption) or an asset purchase under specified program conditions.

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

In detail

Stock purchases: A stock purchase or stock redemption is an eligible structure, provided the loan is not made solely to an individual and the small business participates as the Borrower or a Co-Borrower. However, an Eligible Passive Company cannot use loan proceeds to acquire stock or acquire a business, except for a transfer between existing EPC owners.
Asset purchases: An asset purchase is treated as a change of ownership when the applicant acquires all or substantially all of the seller's assets and continues operating the seller's business. If there is no clearly defined continuity of operations, the lender may evaluate the request as a start-up rather than a change of ownership.

The source

What the SOP says

“A Borrower(s) (and any individual Co-Borrower as permitted in this Appendix) may use loan proceeds to fund a change of ownership through either a stock purchase (including a stock redemption) or an asset purchase, only under the circumstances described under this Paragraph.

SOP 50 10 8.1, Appendix 15: 7(a) Changes of Ownership > This appendix is organized as follows (lines 5030-5036)✓ Verified

“An asset purchase will be deemed a change of ownership and must comply with all of the requirements of this Paragraph if the Applicant(s) is purchasing all or substantially all of the assets of the seller’s business and is continuing the operations of the seller’s business.

SOP 50 10 8.1, Appendix 15: 7(a) Changes of Ownership > This appendix is organized as follows (lines 5030-5036)✓ Verified

“A 7(a) loan cannot be made solely to an individual. The small business must be either the Borrower or a Co-Borrower.

SOP 50 10 8.1, Appendix 15: 7(a) Changes of Ownership > The following requirements apply to all change of ownership structures: (lines 5037-5045)✓ Verified

“With the exception of a change of ownership between existing owners of the EPC, an EPC may not use loan proceeds to acquire a business, acquire stock in a business or any intangible assets of a business, or to refinance debt that was incurred for those purposes.

SOP 50 10 8.1, Chapter 2: Special Transaction Structures > For specific information on change of ownership loans with an EPC/OC structure: (lines 650-653)✓ Verified

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