It has come to my attention in conversations with clients over the years that several borrowers are confused by how much the SBA and bank require as injection from each partner in a partnership when purchasing a property. Several clients that I have spoken with over the years believe that each partner in a partnership must inject a percentage of the total required down payment that is equal to their percentage of ownership in the new business.

For example, if two partners each own 50% of a new LLC. that is formed to purchase a hotel and the total required down payment is $200,000 that the SBA and bank require that each partner MUST inject $100,000 aka 50% of the total down payment each. However, this cannot be further from the truth. The SBA and bank do not correlate the required down payment from each partner with their percentage of ownership in the new business. In my hypothetical example above, you could have one of the 50% owners inject $200,000 and one of the 50% owners of the partnership inject $0 and that is perfectly fine. In fact, I have closed several loans with loan structures similar to this type of structure where one or multiple partners are the capital investor(s) and one or multiple partners are “sweat equity” partners. Usually, these scenarios occur when you have an elder (Father, Uncle or the like) as the capital investor that will provide the majority and sometimes all of the total down payment when the son/daughter or the like will be the daily operations manager and he will be the “sweat equity” partner. At HBC, we are extremely well versed in the SBA SOP’s and therefore know what can and cannot be done per SBA guidelines when getting your loan approved. Our underwriting knowledge and firm understanding of the SBA SOP’s is at your disposal and will be your leverage to help get your loan approved in the most favorable terms and structure possible.

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