SBA 7(a) Partnership Buyout | $2.42M Franchise Brokerage Succession and Expansion

The transaction had to accomplish six objectives in a single facility for a borrower who needed to complete the partnership succession without injecting personal capital. The founding partner was ready to exit. The next-generation partner had been operating the business and was positioned to take full ownership, but the buyout had to be structured so the business's own cash flow and collateral supported the entire transaction. Simultaneously, the business was leasing one of its seven offices at $4,750 per month and needed to acquire that property to eliminate the lease expense and add it to the owned portfolio. Two existing office mortgages needed to be refinanced into the SBA facility. Revolving credit lines and a credit card that had been used for working capital needed to be consolidated. And $400,000 in fresh working capital was required to fund hiring and expansion in the year ahead.

The collateral package spanned multiple office properties across a western state where real estate transaction volume is low and the time between comparable sales can extend well beyond a decade. When the lender issued the commitment and ordered third-party appraisals, several properties came back with values below what the capital structure required. In a market with sparse recorded sales data, the initial appraisals reflected the limited comparable transactions the appraisers could identify. The gap between the appraised values and the values the financing structure needed had to be closed through the SBA's formal appraisal reconsideration process, or the deal would not close at the committed terms.

The structural complexity of combining a partnership buyout, a real estate acquisition, two mortgage refinances, revolving debt consolidation, and working capital into a single SBA 7(a) facility required every component to be sized, documented, and justified individually while functioning as a unified capital structure. Each use of proceeds had to satisfy SBA program requirements independently, and the aggregate facility had to demonstrate debt service coverage against the brokerage's operating cash flow.

• Six distinct capital needs in a single facility: partnership buyout, office acquisition, two office refinances, revolving credit consolidation, and working capital
• 100% buyout of founding partner's interest with no out-of-pocket capital required from the acquiring partner
• Multiple appraisals came back below required values in a market with infrequent transaction volume and limited comparable sales data
• SBA SOP appraisal reconsideration required on multiple properties with formal requests and additional comparable sales sourced from all available platforms
• Seven-location brokerage with a mix of owned and leased offices across multiple markets requiring coordinated collateral documentation

Cornovus Capital structured the $2,423,000 SBA 7(a) partnership buyout to address every component of the succession and expansion in a single closing. The facility covered the full acquisition of the founding partner's ownership interest, the purchase of the leased office at $750,000 (converting $4,750 per month in lease expense to an owned asset), the refinance of two existing office mortgages totaling approximately $1.05 million, the consolidation of $136,500 in revolving credit and credit card balances, and $400,000 in working capital for hiring and operational expansion. Closing costs and SBA fees were absorbed within the facility. The 25-year fully amortizing term at WSJ Prime plus 2.50% produced a debt service obligation the brokerage's operating cash flow could support while funding the growth the working capital was designed to enable.

When the appraisals came back light on multiple properties, Cornovus Capital prepared formal appraisal reconsideration requests under SBA Standard Operating Procedure protocols for each affected property. The reconsideration packages included additional comparable sales data sourced from every available platform, market analysis supporting the value conclusions the capital structure required, and documentation addressing the specific conditions in the regional market that limited the initial appraisers' comparable sales pool. The reconsideration process required detailed knowledge of SBA appraisal protocols, the ability to identify and document additional comparable transactions in a thin market, and the persistence to work the process through to revised value conclusions that supported the deal.

The partnership buyout was structured so the next-generation partner assumed full ownership with the business's own collateral and cash flow supporting the transaction. The acquiring partner was not required to inject personal capital. The brokerage's national franchise affiliation, its established position across seven offices, its diversified revenue base across residential sales, commercial sales, and property management, and the operational continuity of keeping the business under the management of the partner who had been running it provided the credit foundation the lender and SBA required.

• $2,423,000 SBA 7(a) facility covering partnership buyout, office acquisition, two office refinances, revolving debt consolidation, working capital, and closing costs
• 100% buyout structure with no out-of-pocket capital required from the acquiring partner
• Office acquisition converting $4,750/month lease expense to an owned asset within the SBA facility
• Formal SBA SOP appraisal reconsideration requests prepared and submitted on multiple properties with additional comparable sales analysis
• $400,000 working capital for hiring and expansion funded within the facility
• 25-year fully amortizing term sized to the brokerage's operating cash flow

The $2,423,000 SBA 7(a) partnership buyout closed with the full capital structure intact: the founding partner's ownership interest fully acquired, the leased office purchased and added to the owned portfolio, two existing office mortgages refinanced, revolving credit consolidated, and $400,000 in working capital deployed for hiring and expansion. The appraisal reconsideration process on multiple properties was completed successfully, with revised value conclusions supporting the committed terms. The next-generation partner assumed full ownership of a 7-location nationally franchised brokerage without injecting personal capital.

The transaction demonstrated how SBA 7(a) financing can structure a complex generational succession where the buyout, real estate acquisition, debt consolidation, and expansion capital all need to close simultaneously in a single facility. The founding partner completed the exit. The acquiring partner took ownership of an established, diversified brokerage with residential sales, commercial sales, and property management revenue across seven offices, five of which are now owned. The $400,000 working capital injection funded the hiring and growth plan the business needed to execute under new sole ownership. The 25-year amortization provided the long-term debt structure a multi-location brokerage requires to invest in people, offices, and market expansion without the refinance pressure that shorter-term facilities create.

• $2,423,000 SBA 7(a) facility closed with six capital provisions in a single structure
• Founding partner's full ownership interest acquired by next-generation partner with no out-of-pocket capital
• Leased office acquired at $750,000, converting $4,750/month lease expense to ownership
• Two office mortgages refinanced and revolving credit consolidated into the SBA facility
• $400,000 working capital deployed for hiring and operational expansion
• Appraisal reconsideration completed successfully on multiple properties through SBA SOP protocols
• 7-location brokerage transitioned to sole next-generation ownership with 5 of 7 offices now owned
• 25-year fully amortizing term at WSJ Prime + 2.50%

Additional financing outcomes are available in our Transaction Highlights archive.