High divorce rates are proof positive that it’s hard for people to get along, even for those deeply in love at one point. True love invariably fades, at least to some extent.
The same is true when it comes to business. You may start a partnership with the best of intentions and the partners seeing eye to eye on every important issue.
If you’re incredibly lucky, your goals, plans and intentions will continue to mesh with those of your partners in the long term. More likely, there will be some disputes that cause tension at times but ultimately will be resolved.
Unfortunately, there’s also a chance that you and a partner end up mixing as well as oil and water – with the damage irreparable.
You might think you’re stuck, making you miserable, not to mention hindering your company’s operations.
But there’s a possible way out of it.
The federal Small Business Administration (SBA) is the rare government-sponsored institution that works the way it was intended, but it tends to be overlooked by a lot of businesses that think they are ineligible for its programs.
That’s often an inaccurate assumption — and it can even help you out of a partner problem.
Consider this example:
You are one of three partners in a business that’s successful, but could be doing even better. Each partner is drawing an annual salary of $250,000. Yet one partner is driving you and the other partner crazy because his vision for the company is at odds with yours. The differences cannot be settled; there is no middle ground.
After assorted discussions, the questionable partner tells the two of you that for $1 million he’ll relinquish his share of the company.
What do you do?
This is where the SBA comes in – an SBA-backed 7(a) loan could provide the money needed to buy out the problem partner. SBA loans contain numerous benefits, including low down payments and generous repayment terms.
Under traditional terms over 10 years, that loan will cost about $11,000 monthly to repay, an annual debt service of $132,000. That may seem like a steep price, but remember that the deposed partner’s $250,000 salary goes away, too, saving you $128,000.
While the peace of mind alone may be worth it, the ability to properly manage your business and move forward with your plans may well cover that difference easily anyway.
A lot of small business owners are terrified by debt – and large amounts of it can be crippling – but this is just another example of how debt can work for you. The old adage that you have to spend money to make money is true, so just consider debt as another form of spending money. Remember that this likely will be money well spent.
Of course, before any buyout you probably want to check with legal counsel to help you avoid mistakes during the “divorce.” Your partner may go away, but the lawyers never do, although that’s a topic for another day.