Hi,

I'm working with a client that will be receiving a $800,000 SBA loan. He currently owns 50% of an Scorp and 50% interest in a partnership. The partnership owns the building that the Scorp is renting from. His plan is to use $200K to purchase the other 50% of the Scorp shares and $230K to purchase the other 50% interest in the partnership. $300K of the loan will be used to pay off the existing building loan and the remaining $70K will be used by the Scorp for cash flow. SBA can only deposit the loan into one account and can only accept payment from one account. We're trying to figure out the best way to structure this to line up the balance sheets and be able to deduct the interest. My thinking is to have SBA deposit the $800K into the partnership (which will soon be a single member LLC). From there, the LLC can loan the Scorp $70K for the cash flow and my client $430K for the purchase of the shares and partnership interest. The LLC would deduct 100% of the interest and report interest income from the Scorp and my client using the same interest rate that aligns with the SBA. The Scorp and my client would also get an interest deduction on their respective tax returns. Am I missing anything? Any better ideas?

Thanks