As a business owner, there may come a time when you need to transfer your ownership or participation in the Small Business Administration (SBA) loan. This can happen when you sell your business, transfer ownership to another person, or simply want to change your ownership structure. In these cases, you will need to sign an SBA Transfer of Participation Agreement.
The Transfer of Participation Agreement is a legal document that outlines the terms of the transfer of the SBA loan. It is a binding agreement between the current borrower and the new borrower, and it is important to have this agreement in place to ensure that both parties understand their rights and obligations.
The SBA Transfer of Participation Agreement covers a few key areas:
1. Transfer of ownership: This section outlines the transfer of ownership from the current borrower to the new borrower. It specifies the date on which the transfer will take place, and the percentage of ownership that will be transferred.
2. Rights and responsibilities: This section outlines the rights and responsibilities of both parties. This includes things like loan payments, loan guarantees, insurance, and any other obligations that the borrower has under the loan agreement.
3. Representations and warranties: The new borrower will need to make certain representations and warranties to the SBA. These include things like confirming that they will use the loan proceeds for the intended purpose, that they have no undisclosed liens or judgments against them, and that they are not involved in any pending litigation.
4. Default and remedies: This section outlines what happens if the new borrower defaults on the loan. It specifies what remedies the SBA has, including the right to call the loan due and payable, and the right to pursue legal action against the borrower.
It is important to have an experienced attorney review any SBA Transfer of Participation Agreement before signing it. They can help ensure that the agreement is fair and equitable for both parties, and that all the necessary terms and conditions are included.
In summary, if you need to transfer your ownership or participation in an SBA loan, you will need to sign a Transfer of Participation Agreement. This agreement outlines the terms of the transfer and ensures that both parties understand their rights and obligations. It is important to have an experienced attorney review the agreement before signing it to ensure that it is fair and equitable for both parties.