---
kind: "section"
citation: "13 C.F.R. § 107.750"
title: "13"
number: "107.750"
heading: "Conditions for financing a change of ownership of a Small Business."
url: "https://uscodex.org/cfr/13/107.750"
---

# §107.750. Conditions for financing a change of ownership of a Small Business.


You may finance a change of ownership of a Small Business only under the conditions set forth in this section.

- (a) **The Financing must—**
  - (1) Promote the sound development or preserve the existence of the Small Business;
  - (2) Help create a Small Business as a result of a corporate divestiture; or
  - (3) **Facilitate ownership in a Disadvantaged Business.**
- (b) **The Resulting Concern (as defined in paragraph (c) of this section) must—**
  - (1) Be a Small Business under [§ 107.700](/cfr/13/107.700.md);
  - (2) Have 500 or fewer full-time equivalent employees; or meet one of the appropriate debt/equity ratio tests:
    - (i) If you have outstanding Leverage, the Resulting Concern's ratio of debt to equity must be no more than 5 to 1; or
    - (ii) If you have no outstanding Leverage, the Resulting Concern's ratio of debt to equity must be no more than 8 to 1.
- (c) **Definitions.**
  - (1) The “Resulting Concern” is determined by viewing the business as though the change of ownership had already occurred, giving effect to all contemplated financing, mergers, and acquisitions.
  - (2) For purposes of this section, “debt” means long-term debt, including contingent liabilities, but excluding accounts payable, operating leases, letters of credit, subordinated notes payable to the seller, any other liabilities approved for exclusion by SBA and short-term working capital loans (so long as the loans carry a zero balance for 30 consecutive days during the concern's fiscal year).
  - (3) For purposes of this section, “equity” means common and preferred stock (corporation), contributed capital (partnership), or membership interests (limited liability company).

## Notes

### Authority

Authority: 15 U.S.C. 662, 681-687, 687b-h, 687k-m.

### Source

Source: 61 FR 3189, Jan. 31, 1996, unless otherwise noted.