The new SBA SOP 50 10 5(B) was released and is effective October 1st, 2009. You can review this SOP here:
Please note the areas regarding goodwill (page 142) and valuations (page 183).
Basically regarding goodwill, the new SOP states that if the purchase of the business acquisition includes intangible assets in excess of $500,000 (including, but not limited to, goodwill, client/customer lists, patents, copyrights, trademarks and non-compete agreements), the borrower and/or seller must provide an equity injection of at least 25% of the purchase price. For example, the borrower may provide 15% and the seller may provide 10%.
For business acquisitions with a purchase that includes intangible assets under $500,000, there are no restrictions regarding goodwill.
There is no goodwill cap included in the SBA SOP effective October 1st, 2009.
Please note, regarding goodwill, the new SOP refers to the value of the intangible assets and not the purchase price as the determining factor. There is some confusion that the determining factor is the purchase price and this is not true. I personally verified this with James Hammersley (Deputy Assistant Administrator, Office of Policy, Washington DC).
In summary:
- The purchase price of the business is NOT the deciding factor for the goodwill contingency - it is the value of the intangible assets, which includes goodwill.
- If the value of the intangible assets (goodwill) is ABOVE $500,000 REGARDLESS of the purchase price of the business, the deal is subject to 25% down.
- If the value of the intangible assets (goodwill) is BELOW $500,000 REGARDLESS of the purchase price of the business, the deal is subject to 15% down (most lenders minimum down payment requirement).