USA Business purchase with SBA Loan

[businessbuyer]

My business partner and I are buying the business that we work at. The business is a C corp and we are making this a stock purchase. We are using an SBA loan to fund the purchase. The loan documents through the bank at list both of us and the business as a borrower.

My question is if we will be able to have the business pay the SBA loan payment instead of boosting our paycheck (and paying personal taxes) and then paying the SBA.

 

[kirby]

SBA will not care who pays them as long as they get paid. So, yes, better to pay thru the c corp for the reason you mentioned.

 

[businessbuyer]

Thanks! That was our train of thought as well.

 

[businessbuyer]

A quick follow up question on this. If the company pays the SBA loan back, is that loan payment considered taxable? In other words - can that loan payment reduce the amount of profit that the c corp reports?

 

[Samir]

There's a few different approaches you can use.

One would be to have the corporation name on the loan. This way, the liability is on the corp's books and the interest paid is expensed each month.

Two would be to create a loan from you to the corporation. You need to charge a minimum interest for the IRS to consider this a real loan, but that's profit for each of you individually. Again, the corp can expense the interest.

Third would be to buy equipment in your personal name that the corp needs and then lease this to the corp. The corp can then expense the equipment 100% since it does not own it.

I'm sure there's some other creative ways to do it--but remember the more creative, the more likely it is going to be examined closely.