Licensing Constraints

Heather discusses a significant hurdle for buyers of licensed businesses due to recent SBA updates to the SOP. Previously, rollover equity allowed sellers to stay indefinitely to provide necessary licenses, but new rules require sellers to personally guarantee the loan for two years and mandate a stock sale, which many sellers find unacceptable. Because the SBA generally requires a seller to exit within 12 months, buyers who lack a personal license face a major risk if they cannot secure one quickly. Heather explains that the best mitigation is bringing a licensed employee into the ownership structure with a small equity stake to ensure continuity. While some states allow for a Responsible Managing Officer (RMO) as a backup, most lenders remain wary of any scenario where the personal guarantor is not the license holder.