US SBA SOP 50 10 8.1 Lender and Development Company Loan Programs A2-B: Section A Ch 2 Para B: Loans to Employee Stock Ownership Plans (7(a))

For a 7(a) loan to an ESOP (to buy at least 51% of the employer or to buy qualified employer securities) or to the employer to on-lend to an ESOP reaching 51% ownership, the Lender determines itself, before first disbursement, that the ESOP meets all IRS, Treasury and Department of Labor requirements (SBA does not review this), makes the employer a Co-Borrower, excludes ESOP set-up costs from proceeds, obtains a full unlimited guaranty from any seller who stays a partial owner (a statutory rule), applies the guaranty rules to owners outside the ESOP, and does not use an EPC/OC structure. The ERISA valuation may replace an independent business valuation, and the equity injection requirement does not apply to a controlling-interest purchase.