If my business partner wants to split an SBA loan to pay it off but I did all the work, can I claim "sweat equity" as my share of the pay off?
Question Details:
My sister and I started S-Corp. We bought a franchise. We agreed to quit our jobs to run it together. I quit 2 jobs; she never quit her job. I spent 5 years full-time building and running the business; she came in very part-time. I am planning an exit strategy. We still owe $18,000 on our SBA loan. We have signed personal guarantees. I claim my uncompensated hours of "sweat equity" has to count towards it. She claims I owe half. I did not get compensated for many hours, while she was compensated for part-time work.
Business Law Answers
It depends on what the two of you agreed to when you formed the company and obtained the loan. If there is no written agreement, it is going to be very messy and you would have to prove that your sister is supposed to give you credit for your efforts. However, either way, the SBA will still look to both of you for repayment. If you would like to discuss any issues further, please feel free to contact my office. The link to my contact information is below. Thank you. The foregoing is general information only, not specific legal advice. No attorney/client relation has been created or should be implied.
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