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?
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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?
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.
Asked on February 6, 2012 under Business Law, Pennsylvania
Answers:
Glenn M. Lyon, Esq. / MacGregor Lyon, LLC.
Answered 11 years ago | Contributor
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.
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