![]() An "Associate" of a small business is defined as (i) n officer, director, owner of more than 20 percent of the equity, or key employee of the small business (ii) ny entity in which one or more individuals referred to in this definition owns or controls at least 20 percent and (iii) ny individual or entity in control of or controlled by the small business (except a Small Business Investment Company ("SBIC") licensed by SBA). In an asset or equity purchase transaction, lender should also review the purchase documents to make sure that the seller(s) does not remain an Associate of the borrower. Upon closing of a purchase transaction, the lender should obtain (i) copies of the assignments of the stock or membership certificates from the seller(s) to the borrower, (ii) copies of the cancelled stock or membership certificates of the seller(s) and (iii) copies of the newly issued stock or membership certificates in the name of the borrower. Next, the lender should review the purchase agreement to determine that the selling equity holders are selling all of their equity interests to either a non-equity holder or to one (1) existing equity holder, who will, upon closing, be the 100% owner of all the outstanding issued equity interests in the company. The lender must first look at the target company's books and records to determine the company's current authorized and issued equity interests (either shares or membership interests) and the current holders of those outstanding equity interests. It is important that an SBA lender properly investigate and document change of ownership. ![]() See SOP 50 10 5(B) Subpart B, Chapter 2, Paragraph IV, Section G. A complete change of ownership occurs when the Borrower purchases 100% of the ownership interest in the business (either by asset purchase or stock purchase) or an existing owner purchases the stock or membership interest of a selling owner or owners resulting in the purchaser owner owing 100% of the outstanding stock or membership interest. However, SBA 7(a) loan proceeds may be used to purchase business assets or interest that result in a complete change of ownership. Loan proceeds from a SBA 7(a) loan may not be used to purchase a portion of a business or a portion of another owner's interest in a business. David frequently travels to Washington, DC in his capacity as a NAGGL Board Member and as a small business owner, to assist the Agency and Congress in developing policies and proposals to advance the interests of SBA lenders and improve the delivery of financial assistance to small businesses. Small Business Administration assisting with the re-write of the SOP 50-10, and is currently devoting time to assisting the Agency with the revisions to the SOP 50-51. Additionally, David serves on NAGGL's Board of Directors, as one of two non-lender members of the Board, and has been honored for his contributions to the industry by being named NAGGL's Instructor of the Year and being asked to serve on NAGGL's Executive Committee.ĭavid was very involved working directly with the U.S. In addition to his law practice, David devotes countless hours to the National Association of Government Guaranteed Lenders ("NAGGL") as a developer and instructor for several of NAGGL's most popular courses, as a member of NAGGL's Technical Issues Committee, as a regular contributor of articles and insights to NAGGL's monthly newsletter, as a member of the District III Liaison Committee and as a frequent lecturer and moderator of roundtable discussions on the latest SBA lending and regulatory issues. David uses these skills on a daily basis to represent the interests of small businesses and the lenders that extend capital to the small business community. His peers have repeatedly voted him a "Super Lawyer" in Philadelphia magazine. Martindale-Hubbell gives David its highest rating of "AV" for his legal skill and ethics. David's skill as an attorney is of the highest caliber. In his practice, David represents and assists numerous small businesses and hundreds of lenders that participate in SBA's lending programs. David has been actively involved in SBA lending and has been helping lenders to document, close, service and liquidate SBA loans for over 20 years. David is the co-founder and Managing Partner of Starfield & Smith, P.C., a law firm specializing in SBA and government guaranteed commercial lending, SBA regulatory issues and general business consulting.
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