The Small Business Administration said Thursday that it had made changes to a contentious rule on how lenders could finance the purchase of a small business.
In its updated Standard Operating Procedure, the SBA raised the limit on the amount of "goodwill" value a lender could finance when making a loan to the buyer of a small business.
Previously, SBA lenders had to apply for special permission to finance any more than $250,000 worth of goodwill value — the portion of a business that derives its value from intangible things such as client lists and copyrights — in the acquisition of a business.
Under the new rules, lenders may finance $500,000 of goodwill value. For amounts higher than that amount, they must either apply for special permission to make the loan or the buyer or seller of the business must agree to contribute at least 25% of the purchase price.
The SBA also eliminated a provision that stipulated that goodwill financing could amount to no more than 50% of the total value of the loan for a small-business purchase.