As of today, we are proud to relaunch this publication under a new name: the Pioneer Buy-Side Brief.

Formerly known as The Buyer Advocate, this rebranded briefing reflects a broader strategic commitment we are making as a firm. Thematically, our content remains unchanged - focused, tactical, and tailored for business buyers navigating SBA 7(a) financing. But going forward, this newsletter will play an even more central role in our work with searchers, operators, and acquisition-minded investors. The name change is designed to match that evolution.

Our goal remains to arm you, the business buyer, with clarity and conviction in a deal environment that is more competitive, more regulated, and more nuanced than ever before.

A Snapshot of the Current Market

Over the last several weeks, our team has been operating at full tilt. We’ve helped multiple clients push transactions across the finish line under the prior SBA SOP - and we are now executing deals under the new guidance that went live June 1, 2025.

Notably, two deals closed at the end of last week: one for a well-established asphalt striping business and another for a bakery equipment distributor with an excellent vendor footprint.

Both transactions required detailed equity structuring, thorough bank engagement, and real-time interpretation of SBA policy changes. These recent closings are proof that deals are not just still possible under the new SOP - they are happening for well-prepared buyers.

With the new rules now in effect, here is what you need to know.

Rule Change One: Partial Buyouts Are No Longer Allowed

The SBA has eliminated the ability to structure acquisitions involving a seller who retains equity without assuming long-term financial responsibility. In short, there is no longer a path to structure a “soft landing” for a seller who wants to keep a toe in the water but avoid risk.

The revised SOP is clear:

• If the seller retains less than 20% ownership, they must still provide a full personal guaranty for a minimum of two years following the closing.
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• If the seller retains 20% or more, they must personally guarantee the entire SBA loan until it is paid off in full, regardless of whether they are actively involved in operations.
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These are not suggestions. They are hard requirements.

For most sellers, especially those looking to exit cleanly, these rules make equity rollover unfeasible. In practical terms, buyers should plan to acquire 100% of the business unless the seller is uniquely committed and financially qualified to serve as a full guarantor.

This change will also affect valuations. Sellers who were previously comfortable rolling over 10 to 15 percent of equity may now request higher cash at close to offset the loss of that structure.

Strategic takeaway: Assume full ownership. If seller participation is critical post-close, structure that involvement through employment agreements or consulting relationships, not equity.

Rule Change Two: Equity Injection Must Be Fully Documented and Compliant

The SBA’s updated guidance formalizes and narrows the acceptable forms of down payment.

To meet the required ten percent equity injection, buyers now have only two viable paths:

Option One:

Contribute 10% of the total project cost in buyer or investor cash. This cash must be fully sourced, transferred, and documented at or before closing.

Option Two:

Contribute 5% in buyer cash and secure the remaining 5% through a seller note that is fully on standby for the entire term of the SBA loan. Standby means no principal and no interest payments whatsoever until the SBA loan is paid in full.

There is no room for interpretation or variation. Capital must be transferred to the borrower entity and evidenced via bank statements, wires, or other verifiable documentation. All sources must be legitimate, fully disbursed, and in the name of the appropriate party.

In recent weeks, we have seen several deals delayed or declined due to unverified or poorly timed capital contributions. Equity commitments that are still “in transit” or sourced from informal arrangements between investors and buyers will not pass lender review.

Recommended actions:

• Build your capital stack early and make sure funds are in the right account well before closing.
• Work with an SBA advisor to verify that seller note terms meet the full standby requirement.
• Avoid margin loans, personal lines of credit, or undocumented transfers as equity sources.

Remember: the SBA and your lender will not just want to see the money - they will want to know where it came from and whether it meets eligibility standards.

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Rule Change Three: Preferred Equity Remains Allowed — But Only If Structured Correctly

Preferred equity can still be used to satisfy part of the buyer’s capital contribution, but only if it behaves like equity and not like debt.

The SBA’s position is now explicit: if the terms of the preferred equity class require or imply mandatory repayment before the SBA loan is repaid, the structure will be disallowed.

This includes:

• Fixed redemption schedules
• Investor put rights
• Accrued but unpaid preferred returns that become due prior to SBA loan maturity
• Payment-in-kind returns that compound on a fixed timeline

What remains acceptable are structures in which preferred returns are discretionary, non-cumulative, and clearly subordinated to all senior debt obligations.

In other words, preferred investors can receive upside, but they cannot demand it on a schedule. Repayment must be tied to the availability of post-debt cash flow, and there can be no contractual mechanism forcing distributions ahead of SBA repayment.

What we recommend:

• If your deal involves preferred equity, engage legal counsel early to ensure the terms comply with SBA requirements.
• Be prepared to provide a legal memo if the structure includes any unusual terms or investor protections.
• Recognize that each lender has discretion. Even if your structure is SBA-compliant, a lender may decline to participate based on internal policy or perceived complexity.

This is one area where working with a broker or advisor who knows the underwriting approach of each bank can dramatically improve your odds of success.

Additional Compliance and Procedural Highlights

In addition to the headline changes, the new SOP includes several procedural updates that are already affecting transactions:

• Lenders must now report 100% of direct and indirect ownership in the borrower’s E-Tran file. That means all holding companies, investor LLCs, and SPVs must be disclosed and documented. Incomplete ownership chains are now a red flag.
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• Professional licensing is under more rigorous review. If your target company requires a state-issued license to operate, lenders are being instructed to confirm that the buyer, or a key employee, holds the license at or before closing. This affects industries like HVAC, plumbing, dental, legal, and more.
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• Environmental due diligence is now time-sensitive. All Phase I or Phase II reports must be dated within 12 months of SBA loan number issuance. If you are buying a business with real estate, check those dates before submitting your package.

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What This Means for Buyers

The SOP 50 10 8 updates do not eliminate the opportunity to finance an acquisition with SBA capital. In fact, we believe they will bring greater clarity and reduce variance in underwriting.

But these changes raise the bar. Buyers must now be more organized, better capitalized, and more thoughtful in their structuring approach.

The most successful buyers in this environment will be those who:

• • Understand what lenders can and cannot do under the SOP
• Engage capital partners early with clean documentation
• Avoid last-minute structuring changes during underwriting
• Partner with professionals who have closed transactions under the new guidelines

If you are a serious buyer — whether you are early in your search or already under LOI — we would welcome the opportunity to connect.

You can schedule a call with our team directly using the link below. These conversations are always low-pressure, highly informative, and focused on helping you think through strategy and structure.

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Schedule a Buyer Strategy Call:

​https://calendly.com/d/cm3b-tbk-qvh/pre-loi-searcher-meet-greet-call​

Reach me directly at matthias@pioneercap.com.

Disclaimer: The information in this newsletter is for informational purposes only and should not be considered legal or financial advice. Business buyers are encouraged to consult with their legal counsel and accountant to ensure the proper structuring of their transactions and to fully understand the tax implications of seller financing.

Thanks for reading! Feel free to reply directly to this email with any questions or thoughts.