Instructor key — Module 2: SBA 7(a) Mechanics: SOP Guidelines, Equity Injections, Standstill Notes, and Guarantee Fees
Instructor/solutions version. Keep separate from the student assignment during assessment.
Calculation solution
Initial Acquisition project cost is $4m. Required injection is 10%. Cash is $180,000 and proposed qualifying limited sources total $250,000. Calculate qualifying-injection shortfall.
Calculated result: 20,000.00000000 (actual USD, except where the question requests a ratio or return). Required $400,000; limited credit capped at $200,000, so accepted total is $380,000. Use appropriate display rounding while retaining formula precision. This result is generated from the independent assignment inputs, not copied from the chapter answer.
Conceptual and judgment marking
A complete conceptual response identifies the measure's economic purpose, the defined perimeter and the risk of confusing it with another metric. Award up to 20 points for explanation, not terminology alone. For the applied question, award up to 15 for linking evidence to a concrete acquisition consequence; do not require an optimistic recommendation.
Spreadsheet marking
Award 15 of the 30 spreadsheet points for live links from assumptions, 10 for a coherent 10% mutation and predicted direction, and 5 for units, readable formatting and checks. Inspect formulas directly rather than accepting cached numbers. Use the instructor workbook for the controlling capstone model; this independent lab uses different inputs.
Calculation marking: 10 points for the correct equation/perimeter, 15 for intermediate arithmetic, and 10 for result, units and rounding. Overall pass requires 80 and all critical checks in the student version.
Original chapter practice solutions
The following solutions were moved out of the chapter so full answers no longer sit immediately below student questions. Match them in order to the chapter's practice problems.
Worked solution: Required injection is $300,000. Limited-source credit is capped at $150,000 in aggregate, although the two proposed limited sources total $180,000. Accepted credit is at most $120,000 + $150,000 = $270,000. The buyer needs at least $30,000 more qualifying unlimited funds, subject to lender verification, even though the proposed nominal contributions sum to $300,000.
Worked solution: The guaranteed portion is $3 million. Fee equals $1 million × 3.5% plus $2 million × 3.75%, or $110,000. Using gross principal would produce $147,500, an overstatement of $37,500. The fee tier depends on the notice and loan facts; the calculation is not a universal flat charge.
Worked solution: No. Current interest and a two-year principal schedule conflict with the full-term no-payment condition. Recast the note with compliant terms, replace the claimed credit with another eligible source, or reconsider the transaction. A lender must also evaluate any non-standby seller debt as debt rather than allowing it to disappear from repayment analysis.
Worked solution: EBITDA DSC is 1.50x; buyer CFADS coverage is 1.15x. The first exceeds a 1.25x historical floor on the stated assumptions, while the second misses an illustrative lender CFADS covenant of 1.25x. Passing the program-style test does not override a stricter loan covenant or prove adequate cash resilience.
Worked solution: EBITDA decreases $8,000, cash taxes decrease $2,000, and CFADS decreases $6,000. The policy's death benefit is not added as current operating cash. Its collateral role and premium cash cost belong in different parts of the underwriting analysis.